Current issuesMainsMayhem in the financial world

o It was just yesterday that a reader was asking me whether sensex would touch 20K. Read my answer in the shout-box. It could not have been more prophetic. The very next day, we find all the financial world shocked!

o "Lehman failed, Merrill sold and AIG trying to raise $50 billion before the opening bell” -- this was the sum and substance of the mayhem that has been unleashed on the financial world.

o Writings about Wall Street being never the same again are only betraying the fears. But it is a matter of time before the shreds are picked up and the markets take these developments in their stride and move ahead. Sure, it will take time. Don't jump and ask me when? My answer for such a question would be "the wise never time the market."

o The oldest and the fourth-largest investment bank Lehman Brothers Holdings filed for bankruptcy, while Merrill Lynch, famous for its iconic bull statue in the New York City financial district, sold out before it was too late. With stunning speed, two of the most storied investments banks faded into history, with Lehman headed for the biggest ever bankruptcy filing and Bank of America (BankAm) buying Merrill in a $50-billion stock deal. Another world titan, the largest US insurer, American International Group (AIG) has been given special permission to access $20 billion of capital in its subsidiaries to free up liquidity. AIG had asked the US Federal Reserve for a bridge loan.

o If you are asked to comment on the impact of the subprime crisis on the financial world, could you have guessed that such high street financial institutions as Lehman, Merril and AIG would be hit? Hardly likely. It will be a couple of years before the crisis runs its course and the financial world finds its feet again.

o BTW who is the CEO of the troubled Lehman Brothers? Richard Fuld.

I have my sympathy for Mr. Sivraj Patil o News reports about his donning three different suits on a

single day (in a space of just a few hours) while appearing before TV cameras and that too when there were terrorist attacks in Delhi, appear to have done him in.

o On this count alone he ought to have qualified for the gubernatorial appointment in Raisina Hill! Instead of

choosing him for that post, Congress party thought otherwise. Isn't it paying the price?

o Today's ET editorial gives us a good titbit in this context: The novelist Gavin Lyall once wrote that “if you can remain calm when everyone around you is losing his head, then you obviously don’t have a clue of what’s going on!”

What next on the nuclear deal front? o Now that the deal is likely to go through the US Congress,

what next? What steps should India take to derive the maximum benefit out of this? An excerpt from a very good article that appeared in today's ET is worth our noting:

o While doing business with Russia and France, it is also important for India to get American companies like General Electric and Westinghouse to do joint ventures with Indian big business so that they develop a long-term stake in, and a revenue stream from, nuclear commerce. That is the only way to evolve a stable long-term relationship of trust, which will lead to easier flow of both nuclear fuel and dual use technologies.

o For this India will have to further open up its nuclear energy industry to the private sector, and even joint ventures with established foreign companies. We could even consider giving foreign companies a stake in the nuclear energy projects in which the Nuclear Power Corporation could be majority stakeholder. Long-term trust in nuclear commerce cannot be built by suspicious State players. It can only come from credible interaction between business entities across nations who, in turn, demonstrate to their people and elected representatives that such relationships are possible.

o Finally, India must think big and see itself as a civil nuclear exporter in future. Nothing stops India from collaborating with Russia or France to develop on a commercial scale its thorium to uranium technology and reap huge benefits in future.

Remember the Khairlanji incident? o This is a small village in Bhandara district of Vidarbha that

was exposed to the worst-ever communal killings on September 29, 2006 when a mob of about 50 villagers attacked the house of Bhaiyyalal Bhotmange, a Dalit farmer, over a petty land dispute. The violence ended only after four of his family members, including his wife Surekha, daughter Priyanka and sons Dilip and Roshan, were stoned and then burnt alive. Mr Bhotmange survived as he managed to flee to a neighbouring village.

o Now, nearly two years later the trial court on Monday held eight of the 11 accused guilty. Three people were acquitted after the court deduced that the killings were not the result of caste atrocity.

What is MNS? Managed Netword Services, in the context of telecom and IT.

o Managed network services typically include voice/data integration services, virtual private network (VPN) services, network management, performance management, guaranteed service levels, fault management,

o change management, configuration management, security (firewalls), application outsourcing and data centre services.

Clinical research segment in India to get a booster dose from government

o THE government has begun speeding up approvals in the area of clinical research which is set to boom in India.

o The clinical research industry in India is currently $200 million, but is expected to reach $1.5 billion in just two years.

Alexandra Kosteniuk o "Beauty with brains" is an apt description of this petite

woman. She stormed into the finals of the finals of the Women’s world championship in Nalchik, Russia. It is very rare to see beauties in the game of chess. But she is a model too.

Harley Davidson to enter India o Perhaps every youngster’s dream, driving a Harley

Davidson is likely to be within the realm of possibility. But what held it back so far?

o One word describes it all: homologation. Remember, we noted about this word sometime back? While dealing with Project Natrip and ARAI.

o India’s policy hitherto had been that the tests needed to be carried out (homologated) only in the ‘country of origin’ of the product. But now the DGFT has relaxed the testing norms that allow US made bikes to be tagged with a EU homologation certificate for sale in India.

Some wonderful thoughts on economic reforms o The champions of reform often fail to come up with any

clear articulation of what they mean by reform. Reform is presented as a series of discrete policy changes – tax reform, capital market reform, trade and investment liberalization, labour market flexibility, deregulation of banking, opening up to foreign investment, privatization of

public enterprises, cutting wasteful government expenditure, etc – rather than as a coherent strategy aimed at generalized emancipation of the people.

o The ultimate goal of reform must be understood as liberating human productive potential from assorted constraints, to help every man, woman and child realize his/her capacity to create something new.

o The ability to translate an idea into reality depends on three things:

Physical infrastructure: power, roads, telecom etc. Institutional support: a supportive rather than stifling

administration, security of life and property, a financial sector that mediates savings efficiently to those who would generate additional incomes using the capital, sufficient supply of talent, ability to forge and enforce legal contracts

A culture that encourages entrepreneurship instead of playing safe all the time.

“The financial sector can take a big leap forward in the next couple of years in terms of financial inclusion.” Comment.

o Yes, it can for two reasons: One is the penetration of mobile telephony. Nimbler

banks feel that mobile phones would take banks closer to the customer than a ‘no frills’ account.

Closing of the technology gap. The mobile handsets will be seeing a glut of java-based applications which will provide the interface for facilitating banking transactions on ordinary handsets.

Chief of IEA o Nobuo Tanaka

India’s solar energy potential o India has about 300 clear, sunny days in a year. According

to CII estimate, most parts of the country receive 4 to 7 kwh of solar radiation per square meter per day making it over 5000 trillion KW per year. This is far more than the total consumption of the country.

Entry loads on mutual fund schemes o Entry load is a charge levied by mutual funds when an

investor steps in. o Open ended mutual funds charge between 2 and 2.5% of

the amount invested as entry load to meet their marketing costs, distribution commissions, etc.

o Close ended schemes are permitted to charge up to 6% as initial issue expenses that are amortized over the life of the scheme.

o SEBI is reportedly toying with the idea of doing away with the entry loads on open-ended schemes.

CBSE Chairman o Ashok Ganguly

What would be the benefits of adopting IFRS by India? o Apart from becoming a part of the international movement

in adopting the standards, the significant benefits include: Encouraging capital flows Reduction in cost of compliance for enterprises Lower cost of capital A boon to professionals enhancing their status,

acceptability and mobility across the globe KPO/BPO businesses will flourish

It’s been a long time since we read a piece from Bradford Delong. Writing about the subprime consequences he talks of three crises and their cures. The piece may be too much for non-finance guys.

o A full scale financial crisis is triggered by a sharp fall in the prices of large set of assets that banks and other financial institutions hold. This can happen in three possible ways and the cure is different for each.

o First, when investors refuse to buy assets at normal prices not because they suspect the economic fundamentals, but because they fear other will panic, forcing everybody to sell at fire-sale prices.

o Second, when investors recognize the asset prices should never have been as high as they were, or that future productivity growth is likely to be lower and interest rates higher.

o Third, a bursting bubble or bad news about future productivity or interest rates drives the fall in asset prices.

On Competition Commission o Want to get a lowdown on what this body does? Can’t have

it better, as it comes straight from the horse’s mouth viz., Vinod Dhall, the Acting Chairman of the Commission.

o One important thing that his writing clears the air over is about mergers and acquisitions.

The finance guys amongst you will love this. It is a challenge to really understand the causes of the subprime crisis. Take a look at “The Bear Flu: How it spread” that appeared in today’s ET, which is a reproduction from Businessweek.

o You are forewarned. It is for finance guys. Have appetite for understanding CDOs and Klios? Be my guest. Wade through this article and try to get a hint of what it is trying to say.

o Those of us who can’t appreciate all this gibberish, will realize one thing: how finance guys keep inventing complicated things to make our lives miserable; and their lives pleasurable!

Climate change o The UNDP’s Human Development Report 2007-08 identifies

2 degrees celsius as the threshold, above which the damages of the global climate changes will be irreversible.

o If the world wants to avert a climate crisis, it has to live within the carbon budget of 14.5 gigatonnes of CO2 per annum for the remaining years of the 21st century.

Significance of the Bali meet o For the first time the deliberations were dominated by the

findings of the IPCC report. There was a complete absence of any questioning of the scientific assessment of climate change.

o Though a couple of countries questioned the extent of required cuts that a new global agreement should incorporate, a compromise was reached supporting deep cuts in emissions and a timetable for a draft plan of action to be completed.

Today, being very light on us, it is time to have some fun. Let's watch Dilbert, the Engineer!!!

DNC directory a failure? o The do-not-call (DNC) registry reportedly attracted only

about 2 mn enrollments, as against the 5 mn that appeared to have shown an inclination for registering in it.

o Initial predictions were that about 50 to 100 mn cellular phone users would register. The slow registrations are reportedly due to:

The non-effectiveness of the DNC which has resulted in even registered users continuing to be troubled by telemarketers. (I can personally vouch for it.)

Lackadaisical attitude of the service providers for this service. (I second this too. Personally I had to call up my service provider four times to register my number with the service.)

o To the above reported reasons I would like to add my own: the general apathy of the Indian consumer for such services. Registering the number is seen as a hassle. And then quite many amongst us would be content to howl at the tele-marketer when disturbed, rather than taking the trouble of registering the number with the DNC registry.

o Nevertheless I think it is too early to write the epitaph of the DNC registry.

When did decimalization of Indian rupee occur? o It is an interesting story that appeared in today’s ET. A

must read for those with an eye on history. o It was 10 years after Independence that our currency came

to be decimalized. Before that it was 1 rupee = 16 annas = 64 paise. This system was perhaps based on the pebble based system of valuation (prevalent in Indus Valley Civilisation) in which pebbles were chosen to be weights in the pattern of 1,1,2,4,8, and 16. The new weights are a sum of all the previous weights.

What is a salami attack? o It is a type of online fraud in which the criminal deducts

small sums of money from the accounts of various victims in a way that doesn’t get detected. The hacker uses it as the safest tool for earning large sums of money without getting even noticed.

Polio eradication failure o It was over a year ago that we noted about this subject.

Even after a year, we seem to have not made any progress on this frontPolio is decisively back and India is only one of the four countries in the world where the disease is endemic. This year an estimated 500 children in the country have been diagnosed with paralytic polio.

o The rise of polio has much to do with the prevalence of the virus in two states – UP and Bihar.

o The failure is largely attributed to the wrong choice of immunization made by India. Experts argue that the OPV (Oral Polio Vaccine) immunization choice was not suitable for India and that this was known even at the time the choice was made. India made this choice in 1978 following an advice from WHO (World Health Organization). In contrast, the other choice was the IPV (Injectable Polio Vaccine), which was 50 times more expensive than the OPV.

o There are three types of polio virus: P1, P2 and P3. Of these, the P2 type is reportedly eradicated. P1 is reportedly more contagious of the three varieties. While the earlier OPV drops were designed to immunize against all the three varieties, switching to a monovalent form (which targets only the more contagious P1 form) of the drops in UP and Bihar in February 2005 proved to be a mistake. Because the recent outbreak is of the P3 variety.

Why the apparent all-round welcome of the SEBI’s guidelines on REITs?

o Real Estate Investment Trusts (or REMFs – Real Estate Mutual Funds) offer individuals a wider choice of

investment, especially in the booming realty sector. But the complication, unlike in the equity mutual fund market for the small investor, is that the NAV (Net Asset Value) of an REMF will not vary on a daily basis. This is because the underlying asset is direct ownership of land and built-up property, whose values will not fluctuate on a daily basis. So the investor would have a reduced choice of exit. Hence it calls for a slightly different rigour in monitoring the operation and performance of these REITs. The valuation of the assets should be on acceptable standards for all the stakeholders. The ICAI and AMFI have done well to firm up on these standards. Secondly, the SEBI guidelines have now mandated that 90% of the post tax profit of these REITs should be distributed as dividends.

What is wrong with our agrarian model? o Watching his writings over the last couple of years, I began

to appreciate the off-tangent thinking of V. Raghunathan. o Many of us would be wracking our brains on finding

measures to improve the lot of our farmers. Here is one radically different way of looking at the solution.

o As India has many small and marginal land holdings, which do not allow any scale economies to come into play, he suggests that corporate leasing of farm lands from these small and marginal farmers should be allowed. This will have two more added benefits:

One, the farmer never loses his ownership of the land, where lot of sentiment is attached to it.

Secondly, he can leverage the only profession that he knows best – farming, by finding employment in these corporate farms. This would supplement his income from the lease rental. A win-win situation both for the corporate and the farmer.

Mrs. Bhutto is no more o It is so sad that the most leading moderate voice of

Pakistan is put to silence by terrorists of Al Qaeda. An editorial comment in today’s ET on the traditional jirga-based tribal system of governing FATA and Waziristan in Pakistan is worth our note:

o Islamabad should realize that it cannot enforce the writ of the constitution in those areas through force alone. Of course, Islamist militancy would, in the first instance, have to be countered through military might. But the backward social consensus that supports such terror can be transformed only through a truly democratic political process.

o What better bet could have been there for Pakistan than Mrs. Bhutto for a truly democratic political process?

What would be the size of the resulting behemoth if SBI carries out the merger of its subsidiaries with itself?

o The new entity will have 14,030 branches (almost 30% of scheduled commercial bank branches), 6441 ATMs (a little less than 25% of the country’s ATM network) and an asset base of Rs. 8,05,795 crores (more than all of the private sector banks).

o Get a picture of what ‘size’ means? Even then, compared with the global biggies, this is still miniscule. For example, take Citigroup’s figures:

Total Net Revenues: $89.6 bn Assets: $1884 bn (as against SBI’s $200 bn approx.) Market capitalization: $274 bn Employees: 3,27,000 Operations: In over 100 countries worldwide

Can you give some strong reasons why the STPI scheme should not be continued? Look at these points from today’s debate:

o Research shows that, for maximizing the effects of tax incentives, they should be offered for a limited period.

o Continued tax exemptions to STPIs, due to their revenue implications, would make difficult meeting of the targets set by the FRBM Act, thwarting prudent fiscal policy.

o Such sops are effectively subsidies to exporters, and are challenged in international fora such as WTO.

o Many of the Indian software sector’s problems span beyond tax exemptions. They include workforce shortages, rising costs of real estate etc. Tax exemption is like treating the symptom while ignoring the underlying disease.

“Development” as defined by Amrtya Sen o Development is an enabler of human freedoms and well-

being, rather than a mere enhancement of inanimate objects of convenience. It is inseparable from environmental and ecological concerns such as clean air and water, epidemic-free surroundings, and the preservation of all life forms.

South Asia’s first underground LPG storage facility o It is commissioned at Visakhapatnam. It is a 50:50 joint

venture between HPCL and Total of France. It is a Rs. 333 crore project designed on ‘water containment principle.’

Infrastructure funding progress o You might remember the noting we made about an SPV

that would be established specifically for funding

infrastructure requirements of the country using the huge forex reserves that are built up with us.

o The government and the RBI have now formally approved formation of the SPV in London. It will be a fully owned subsidiary of the IIFCL – India Infrastructure Finance Company Limited. It will access part of the forex reserves and then lend it to Indian companies for funding their capital expenditure abroad.

o RBI agreed to set aside $5 bn for this purpose. The SPV will borrow from RBI in the form of long term securities issued in foreign currency. RBI will subscribe to these securities and the SPV will then provide foreign currency funds to Indian companies engaged in the infrastructure sector. .

Why are hotels likely to face labour problems in future? o So far hotels have been out of the purview of the Factories

Act, 1948. They are regulated through Shops and Establishments Act. The definition of a ‘factory’ in the Factories Act excluded hotels, restaurant or eating places and railway sheds.

o Once they are brought under the purview of the Factories Act, they will not be able to retrench their employees or shut down their operations without the approval of the authorities.

Government plans exclusive streets and arcades for designers to promote special interest shopping among foreigners

o This is as part of its efforts at promoting top end retailing. It is expected to increase the per capita revenue expenditure by foreign tourists generating greater foreign revenue earnings for the government.

o Indian fashion design sector is expected to reach about Rs. 750 crores by 2012 from the present Rs. 270 crores.

o The country accounts for barely 0.2% of the international industry’s estimated size of about Rs. 1,62,900 crores.

Picocells o This is a technology that creates micro cellular sites called

‘picocells’ within an aircraft, without interfering with the airplane’s communication or other systems and will make cell phone calls possible for travelers.

Japan plans world’s fastest maglev train o Estimated to cost $45 bn and to be operational by 2025,

this is expected to travel at 500 kmph. o At present the only maglev train that is operational is in

China (Shanghai). o Maglev (magnetic levitation) trains travel above ground

through an electromagnetic pull. 2007 was a record year for equity mop ups

o Equity mobilization in 2007 was the highest ever in the Indian capital market’s history. The market mopped up Rs. 45,137 crores compared to Rs. 24,679 crores in the previous year.

Update on telecom density numbers o Just recently we noted these numbers. I found that the

figures noted earlier by us are a little dated. Look at the figures as of October 31,2007:

Total number of phones in India: 256 mn New phones added per month: 6.65 mn Tele-density: 22.52 per hundred persons.

o Tele-density was barely 0.6 in March 1990. In that year, India had barely 5 mn phones in total.

List out a couple of important steps that have ushered in a changed telecom sector in India.

o Passage of the TRAI (Amendment) Act, 2000, which split regulatory and dispute settlement roles of the original TRAI. Assignment of the latter role to the newly created TDSAT (Telecom Dispute Settlement and Appellate Tribunal).

o Transferring the service providing function of the DoT to the newly created BSNL.

o We can also add the Unified Access Service Licence regime that allows the holder to provide fixed line as well as cellular service in an area.

Ever the optimist, TT Ram Mohan while giving his take on why we should cheer up and look up for a good 2008, explains how a banking crisis is not likely in spite of the subprime crisis:

o Banks’ losses are expected to rise in the months to come as the crisis unfolds. Many of the off-balance sheet vehicles floated by banks are now coming on to their balance sheets. As banks are expected to carry a minimum of regulatory capital against balance sheet assets, it is argued that their ability to extend credit will be impaired and we could see a credit crunch.

o This is true, of course, but a credit crunch does not imply a banking crisis. A banking crisis involves the failure of several banks, that is, the net worth of several banks gets wiped out. There is nothing so far to suggest that such a crisis threatens American banking. Large banks operate with a capital adequacy ratio of over 12% against the regulatory minimum of 8% or so. They are well placed to absorb the impact of the subprime crisis and also to boost their capital. That is because, as Citibank and UBS have shown, there are overseas investors willing to provide capital.

Mobile Fisher Friend project o It is a unique project launched by the MS Swaminathan

Research Foundation. In a tie up with telecom and software majors, this project developed applications to provide fishermen with up-to-date information of relevance to them.

o At the press of a button, fishermen now can gain access to information on wave height, weather, potential fishing zones, news flashes, government schemes and latest market price.

Akshardham temple complex in Delhi sets world record o The Guinness Book of World Records has recognized this

complex as the world’s largest Hindu temple complex.

Mobile STD calls to become cheaper? o The 225 mn cellular users of the country can perhaps

expect 5 to 10% reduction in usage charges. This is because the ADC (Access Deficit Charge) regime is likely to go w.e.f. April 1, 2008.

o You might remember that the ADC is used basically to fund state-owned BSNL’s operations in rural India.

o Telecom regulator TRAI has already decided that ADC cannot continue in perpetuity as the idea behind the levy was to have it only for a limited period, mainly to give time to incumbent operators to rebalance their tariff during the transition. The regulator also said if the DoT feels that BSNL requires further financial support for its unviable rural landline services after March, 2008, the PSU can be funded from the USOF (Universal Service Obligation Fee).

o All the telecom companies pay 5% of their total revenues towards the USOF. This fund has now become a sizable Rs. 10,000 corpus. DoT is contemplating using this substantial fund towards encouraging R&D and increasing the tele-density in the country. At present the country’s tele-density stands at about 22%. Rural tele-density is still under the 10% mark.

o Look at the details of the slashed ADC charges in March, 2007

Hand-in-Hand 2007 o This is the code name given to the first ever Indo-Chinese

military exercise on anti-terrorism conducted recently at Kunming in China.

TVS comes out with ABS for two wheelers o In a first of its kind in the world, TVS is set to launch Anti-

lock Braking System in two wheelers.

o ABS is a high-tech feature that helps avoid skidding of vehicles and allows sure stopping on wet and slippery roads. It reduces the chances of crashing, the severity of the impact by instantly locking the multiple wheels of the vehicle at a time.

o This technology is already there in four wheelers. Country’s metros and growth of financial services

o According to the 2001 census, there are 35 cities that are classified as metros in India and they have a population of 108 million.

o The country’s top 6 metros account for only 10.5% of population but consumed 61% of bank credit in 2006-07 against 55% in 1999. They are responsible for 46% of the total bank deposits – a rise of 10% over the corresponding figure of 35.6% in 1999.

Game theory and spectrum auctions o Remember our noting about the 2005 Nobel laureate

Robert Aumann? He was awarded the prize for his contribution to game theory. A look at the basics of game theory.

o It had been first launched by John Von Neumann and Oskar Morgenstern, who had argued that this theory would help economists find a way to investigate how each economic player’s actions influence those of others. Though their work was basically confined to two player ‘zero-sum’ games, it was John Forbes Nash who extended the concept to any finite game (not just zero sum games) and proved that games with more than two players must have at least one strategic equilibrium, the Nash equilibrium.

o It was this that was widely used in the 1994 spectrum auctions in US. The FCC (Federal Communications Commission) turned to the economists to understand the economic principles of auction and in designing a good auction for auctioning spectrum. In the year 2001 alone, more than $100 bn was realized by way of spectrum auctions all over the world by governments.

An interesting tidbit about Russia’s “Winter Palace and Hermitage”

o This is the world’s largest art gallery and houses more than 30 lakh art pieces. If you want to see all these at a stretch, you will have to walk a total of 24 kms!!!

Indian Trusts Act, 1882 to be amended o The government is contemplating to amend this Act to

allow trusts to invest in securities, including shares and

bonds, of listed companies. This move is expected to further charge up the booming stock market.

o There are reportedly a few thousand trusts in the country, of which about 400 are very big with phenomenal resources.

o Section 20 of the Act which prescribes the investment options is proposed to be amended.

Thermal efficiency to boost low emissions o All across India, thermal efficiency (which denotes the

percentage energy content of fuel being converted into electrical energy) rate in coal-fired power plants is a low 28%.

o In contrast, average thermal efficiency levels abroad, in routine commercial operations, is in the range of 42-44%.

o A one percentage point increase in thermal efficiency reduces CO2 emissions by over 3 percentage points.

World Bank’s ICP report says Indian economy is only 5th largest; not 4th largest

o ICP: International Comparison Programme. o This downsizing is on PPP (Purchasing Power Parity) terms.

The country’s GDP in PPP terms for 2005 is estimated to be only $2.34 trillion compared to $3.8 trillion computed earlier. This revision occurred because the price data used by the Bank to estimate PPP has been changed to the year 2005, as against the year 2000 used in other World Bank reports.

o PPP expresses the value of national currencies in terms of a common currency, and in this report the US dollar value in 2005 has been used as the common currency.

Americans are now tripping on their credit card payments o Americans are falling behind on their credit card payments

at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year. This is largely attributed to financial deterioration in many households due to mortgage woes.

o 325 million individual accounts are held in trusts that were created by credit card issuers in order to sell the debt to investors. Together they represent about 45% of the $920 bn the Federal Reserve counts as credit card debt owed by Americans.

o Over Rs. 1000 crores is lying with banks in India in the form of unclaimed deposits in 1.03 crore inactive accounts.

o Banks term money lying in accounts that have been inactive for over 10 years as unclaimed deposits.

Language lessons

o A sentence in today’s ET: There has always been an unresolvable tension

between the party’s hardline and the ecumenical demands on its non-Hindutva allies.

o What is meant by ‘ecumenical’ here? It means: concerned with promoting unity among

religionso What is meant by skulduggery?

Trickery: verbal misrepresentation intended to take advantage of you in some way.

Nuances in taming inflation o In a very good article on suggesting the course of action

that the RBI should take in the ensuing year, Rohit Prasad gives us some good opinion:

o CPI (Consumer Price Index) places a much greater emphasis on food (46% weight) as opposed to 15% in WPI (Wholesale Price Index). Therefore, CPI tends to be less interest rate sensitive and more affected by supply side movements than the WPI. In other words, the problem of inflation has partly already been solved (since WPI is down and CPI follows WPI with a lag), and the portion remaining cannot be solved through monetary tightening since the CPI is affected by non-monetary measures far more than by monetary measures. In other words, as far as controlling inflation is concerned, it is time for Reddy (RBI Governor) to take a bow and Chidambaram to enter the stage.

Ever heard of “regulatory capture”? o It describes a situation in which the regulator does not act

in the public interest but is instead driven by concerns of the entities that it regulates.

o What should be the relationship between the regulator and the regulated? How do vested interests seep into regulations, blurring the line between both groups? When does regulation begin to get dictated by interests of those who are being regulated? When does a regulator exactly forfeit its autonomy? Concerns such as these point to what is referred to as ‘regulatory capture’.

o According to public choice theory, the regulated will find ways to capture decision-makers directly or indirectly. The theory of regulatory capture was proposed by Nobel laureate economist George Stigler. The concept found roots in the economics of regulation – where the government is responsible to protect and distribute public goods.

No more ‘outsourcing’, it is ‘worldsourcing’ that we should learn now. So says William Amelio, the CEO of Lenovo.

o What it refers to is the fact of a product being labeled as ‘Made in India’ or ‘Made in China’, but containing components manufactured in many places all across the globe.

o He feels that this is a powerful emerging market force that can help India set itself on a new course to prosperity and its fair share of the global economy.

o He sees this as a business strategy that smart, ambitious companies use to take the underlying forces of globalization and shape them to maximize the value and quality they deliver to customers worldwide.

o Differences between outsourcing and worldsourcing: While the former is a centralized, top-down strategy

designed to save money on non-core operations by handing those operations to a third party evaluated by a single criterion: the lowest price, the latter is a global, decentralized strategy designed to drive greater value and quality by distributing an organization’s core functions across multiple global hubs of excellence located wherever the best resources, talent, ideas, and efficiencies exist or can be created.

o The benefit of worldsouring? Global companies that worldsource their goods and

services are exposed to the probing light and criticism from demanding customers and government regulators in many diverse countries. They create trusted brands by adhering to the highest standards of governance, transparency, compliance and quality.

Some lucid commentary on the off-budget liabilities o We have noted about the issue of oil bonds to OMCs on a

couple of occasions earlier. Let us look at some commentary on that practice:

o Most of the states having enacted fiscal legislations (FRBM Acts), cannot take recourse to accounting jugglery like issuing bonds to take their subsidies out of their budget books. So, after this fiscal’s performance, it is likely that Centre will be on a weaker wicket when it comes to taking the high moral ground, as it used to do in the past, when it talks of fiscal prudence.

o Issuance of bonds helps fiscal managers to postpone liability to a future date. Over the last decade or so this has been resorted to.

o In effect, this translates to inter-generational inequity – the future generations pay for such acts of fiscal jugglery. Some argue that issuance of oil bonds is a violation of the basic tenets of FRBM Act. Perhaps not in letter, but in spirit.

Short selling on our bourses allowed o SEBI formally laid down the framework for short-selling and

the SLB (Securities Lending and Borrowing) scheme for all market participants.

o With this any non-institutional investor (that means small investors, day traders and high net worth individuals) can now short sell securities. FIIs/MFs will be allowed to short-sell once SEBI specifies the date.

o However naked short-sales won’t be allowed. Naked short-sales are sales that are not backed by delivery.

Scorpene submarine deal gets CBI probe o The Delhi High Court has ordered a CBI probe into the Rs.

16,000 crore deal as there were allegations of kickbacks in the deal.

Yuletide keeps market in low spirits o So reads a news headline. What does ‘Yuletide’ mean?

It refers to Christmas, the period extending from Dec. 24 to Jan. 6. There is an interesting background.

Yule is a winter festival associated with the winter solstice celebrated in northern Europe since ancient times. Its Christianized form is "Christmas", which is essentially the symbology and traditions of Yule with the Christian story of the birth of Jesus of Nazareth superimposed upon it. Yule traditions include decorating a fir tree, burning a Yule log, the hanging of mistletoe and holly, giving gifts, and general celebration and merriment.

IFCI strategic sale fiasco o The government’s attempt at selling 26% stake in IFCI to a

strategic investor ended up as a farce. o There was confusion over whether the strategic investor

would get management control. The investor was getting only two out of eight board seats and had no right to appoint the CEO. Usually the world over, a strategic investor gets management control.

India goes ‘open source’ in drug discovery o I think this is one measure which should take us to a

different league altogether. o The idea is that all relevant data and accumulated

intelligence on a particular disease, would be hosted

online. We are starting with TB. Researchers and experts then would be encouraged to come forward and solve specific problems, which would largely be chemical in nature, essentially figuring out mathematical algorithms to make protein to bind to the target. Promising solutions would then be assigned to research organizations for clinical testing and validation. The multi-stage problem solving approach should logically yield a cure.

o The consequences of this would be: It is nothing short of taking drug discovery away from

the exclusive preserve of a few MNCs with deep pockets.

Though primarily directed at promising markets, typically diseases common in rich countries, some of the third world ones such as TB are also included.

The drugs developed through the process would not be IPR- protected and would, therefore, become a low-cost generic from day one.

Putin is TIME’s Person of the Year o You know, this selection has become politically sensitive in

the US? o On its part the TIME magazine said it is not an honour, not

an endorsement or a popularity contest. It is a clear-eyed recognition of the world as it is and of the most powerful individuals shaping the world – for better or for worse.

South-South cooperation (From Anthony de Sa’s article) o December 19 is observed as the South-South Cooperation

Day. o The essence of this cooperation is that the wealth of

knowledge and capacity in developing countries, when systematically mobilized and shared, can be a powerful tool for their effective participation in the global economy.

o How is an industrial economy better than a commodity exporting economy?

Commodity export (or unprocessed agriculture) confers disproportionate profit on landowners and traders, with practically no spin-off benefits – in fact, sometimes with the negative effect of starving domestic industry of raw materials. One the other hand, industrialization makes profit for factory owners, no doubt, but it also gives rise to a host of upstream and downstream ancillaries that provide year-round employment, availability of consumer goods to raise the standard of living, and all-round empowerment.

o Functional literacy plays an important role in the making of an industrial economy.

Functional literacy is not just those who are literate, but rather the percentage of literates equipped with relevant production skills and production-related service capabilities, actively involved in design, processing, manufacturing and marketing.

Now that the tax revenues are very buoyant, is it time to reduce the tax rates in India?

o Gist of arguments put forth by two experts: The idea being floated about to reduce the rates

from 30% to 26% needs to be viewed with some circumspection. This is because a 4% to 5% reduction in the rate could translate into a 13% reduction in corporate tax collections.

A pure and simple reduction in rates with no accompanying rationalization would amount to a lost opportunity.

Will the reduction induce a Laser-curve effect? What this means is, would it result in higher collections through better compliance?

Whether a reduction in tax rates is the best way to use the present expanded collections? Perhaps it could be better used to improve our infrastructure or something else. Need it be used for just give-aways?

What is the ‘zeroing’ principle adopted by the US in dumping cases, that is raising the ire of the rest of the world?

o What the US does while calculating the average dumping margins is ignore (thus zeroing) the negative dumping margins. Dumping margin is the difference between the normal price of a product in the market of the exporting country and the export price. When the average dumping margin on a number of similar products is calculated, if the negative margins (where the local market price is more than the export price) are ignored (zeroed) this results in an inflation of the anti-dumping duty.

o That’s why the exporters to the US are up in arms against this method of calculation of the anti-dumping duties.

While writing today’s notes, I was listening to “Move ya body” song from Johny Gaddar. Felt like giving a link of the video. What a remarkable lady? From the days of “Glassy” to this one. As good as Nina Sky for me. Here it goes…

Akash test fired successfully

o India’s multi-target medium range missile with a strike range of 25 kms and capable of carrying warheads of 50 kgs was test fired successfully again.

o In these trials Lakshya, the PTA (Pilotless Target Aircraft) was used as the support system for the target.

Some details about steel making o Ever heard of the TMT steel bars?

TMT stands for thermo-mechanical treatment process, used in making the steel.

What goes on in this manufacturing process is quenching and tempering of the steel. In this process, steel bars are passed through a specially designed water-cooling system where they are kept till the outer surface of the bars cools down while the core remains hot. When the bars are withdrawn from the cooling system, heat flows from the core to the outer surface, further tempering the bars, which helps them attain higher yield strength. The resulting heat treated structure has superior strength and toughness.

o This technology patented by HSE (Hennigsdorfer Stahl Engineering) Gmbh, a German company.

o Earlier to this CTD (Cold Twisted Deformed) bars, a technology developed sometime in 1970 was being used in Europe. But it fell into quick disuse there. But in India this was being used.

o A transition from CTD to TMT is considered a sign of progress for a country. Nowadays TMT bars are widely being used in the construction industry.

Why are air travel agents angry? o They are upset with airlines and the government. They are

losing about Rs. 25 crores per month which is not paid by airlines to them. This is due to the fact that airlines are excluding fuel and congestion surcharge (Rs. 1800) from the airfare. It is only on airfare that commission (about 5%) is paid by airlines to the travel agents.

Certified market participants o SEBI is planning to make the life of the retail investor

easier by coming up with a database of certified market participants. This certificate is issued by its NISM – National Institute of Securities Management after the participants clear exams conducted by it.

o SEBI is also stated to be having plans of grading these market participants to give some additional comfort level for the retail investors.

o Don’t get confused by the phrase market participants. It is nothing but stock brokers.

Bond market to see lot of action o This is due to the fact that banks need to raise about Rs.

30,000 crore to meet their Basel II commitments. Defaults on the vehicle loans on the rise

o The mean delinquency figure, 12 months after securitization, stands at 4.92% for loans originated in 2006. This is double the figure of 2.10% for loans that originated in 2003.

Land acquisition and SEZs o Can you reel out two problems with the issue of

establishing ‘market value’ of the land that is about to be acquired for an SEZ?

o In an article on the subject Prabhu Ghate gives two of them. Take a look:

First is not knowing the counterfactual – what would the value of the land have been in the absence of the project? Large projects affect land prices for miles around. A mechanical tying up of the land price to the stamp duties assessed on sales at the time of mooting the project is unfair, because it penalizes persons for land undervalued by others so as to save on stamp duty.

Secondly, it understates the increase in land in values that would have taken place even without the project, especially in areas which are nearer to large cities.

Subprime’s lessons on socialism . o He argues that the subprime fiasco has taught some

socialistic lessons to us. In the process he also gives a very neat account of the how the mess unfolded itself. Does help us get a clearer picture of what (or how it) went wrong.

o His argument is that the unfolding mess has added lot of housing stock to the market. This has resulted in some people getting highly cross subsidized housing at the expense of the government and shareholders of banks which have burnt their fingers in the mess. He wonders whether or not this is a kind of socialism. .

While on the subject let us see on more casualty o Morgan Stanley reported its first every quarterly loss in 73

years!!! o Led by a $9.4 bn writedown, it lost $3.61 bn in the fourth

quarter.

o Though John Mack, its CEO is still retaining his job, it may be a matter of time before there will be calls for his resignation.

o Morgan Stanley is the second largest investment bank in the US.

Our PM also worries about recession in the US o With the external sector accounting for almost 40% of GDP,

the country cannot be immune to international developments, he feels.

How much does it cost to administer subsidies? o According our FM, the centre spends Rs. 3.65 to transfer

Rs. 1 to the poor in subsidies. Mobile bank branches

o TMB (Tamilnadu Mercantile Bank) will be perhaps the first bank to launch these mobile branches. It is essentially a van which will have a computer connected to the bank’s server through a VSAT, two staff and a security guard. It could cover about 6 to 7 villages in a day.

o Looks like a perfect solution for making headway in banking penetration.

o Only about 59% of adult population in India has bank accounts. In rural areas, this is just 39%.

Classical language status to Telugu o The Centre gives this status to a language which is 1000

years old. Recently it seems to have revised this qualifying period to 1500 to 2000 years.

o But Telugu, according to ASI (Archaeological Survey of India) studies is now about 2400 years old.

o Three inscriptions recovered in Bhattiprolu (Guntur District) contained several Telugu roots or words. These inscriptions date back to 400 BC.

o Telugu language was found in a more refined form in Kantamnenivarigudem (West Godavari District) and Gummadidurru and Ghantasala (Krishna District), dating back to 2nd century AD.

Pest in Areca nut o One of the important pests of this crop is spindle bug. o These bugs feed on the top most regions of the leaf axils

by injecting toxic saliva, producing elongated necrotic lesions, shredding and short holes in the leaves.

What is the most urbanized state in India? o Tamilnadu. It has 44% of its population living in urban

areas. How does world insurance market impact Indian insurers?

o In 2007, the insurance sector worldwide suffered a loss of $25 bn.

o Indian insurers are impacted in two ways: Large risks with a sum insured of over Rs. 10,000

crores are reinsured directly by local companies. As a result, the pricing in their contracts reflects the position of international markets.

Cheaper availability of reinsurance increases the capacity of local insurers and therefore increases competition. When this is not the case, even small ticket insurance deals are impacted negatively.

Language lessons: o I came across a phrase in today’s ET editorial:

“The credit markets in the major economies remain gummed up.”

o What is meant by ‘gummed up’? It means ruined or bungled up.

Listing of PSEs o There are nearly 250 PSEs (Public Sector Enterprises) but

only about 50 are listed. At the end of March 2006, 157 PSEs (out of 215 surveyed) were profitable, against 120 in 2001-02.

o As most of the PSEs are in a profit making mode, ET argues that this is the right time for listing these PSEs. Divesting a small stake in these PSEs will unlock lot of value.

Rise of the rupee and the bunkum of losing jobs o SSSA Aiyar, as is his wont debunks the theory that the

rising rupee is costing India in millions of lost jobs.. o If we look at rupee’s value vis-à-vis other major currencies

in Asia from July 2005, it is clear that it appreciated much less than the other currencies. It has risen only 9.4% against the dollar whereas China (10.9%), South Korea (11.1%), Malaysia (12.6%) and Thailand (20.2%) have appreciated much higher.

o With many a corporate taking a beating because of the rising rupee, another column in today’s ET suggests that corporate India should start using ‘constant currency’ to report its results. “Constant currency’ is when a company reports its results, stripping the effect of changes in foreign exchange rates.

o For eg., if a company sold goods worth $100 in 2006 at Rs. 40 to a dollar, its sales would be worth Rs. 4000. In 2007, if the sales rose to $120 and the dollar fetched Rs. 30, then sales in rupee terms would be Rs. 3,600, a 10% decline. But in constant currency terms, the sale would grow by Rs. 20%.

About the 11th Plan o Many a time when we are asked to say a few words on the

current or ensuing five year plan, we don’t know where to begin and where to end.

o Look at this on the 11th Plan: The plan envisages an investment of Rs. 36 lakh

crores in various sectors, with special emphasis on equitable growth. Important targets in the plan include:

Reduction of poverty by 10 percentage points Generating 7 crore new employment

opportunities; and Ensuring electricity connection to all villages.

The plan targets a 9% growth rate for the economy. The GBS (Gross Budgetary Support) for the Plan has

been fixed at Rs. 10 lakh crores. Gujjar agitation and Chopra committee

o The Justice (Retd.) Jas Raj Chopra committee that has been constituted to go into the issue of declaring Gujjars of Rajasthan as a scheduled tribe has submitted its report.

o The committee felt that the community’s demand for enlistment in the ST category could not be met, as such a step would require the abrogation of the criteria set by the Centre for the process. It said “Passing judgment on the candidature of a particular group for the ST status in terms of presently used criteria is very difficult.”

o The Gujjars are obviously unhappy with this. Their leader Kirori Singh Bainsla termed the report as a ‘deceit’ on the part of the Rajasthan CM.

o But the Meena groups, which till now have been opposing the ST status to the Gujjars, spoke in somewhat conciliatory tone about the government’s decision to refer the matter to the Centre.

FIFA world player of the year o Is Kaka, the Brazilian midfielder. o For him, it is the third accolade this year. He won European

football’s Golden Ball and World Soccer magazine’s Player of the Year award.

o He is the fifth Brazilian to win this title. The others are: Ronaldo, Ronaldinho, Romario and Rivaldo.

Sudoku o Ever played this game? o It was invented by Swiss mathematician Leonhard Euler in

the late 1700’s.

o Now a colourful and easier version of this game is invented by a doctoral student (Antony Harfield) at the University of Warrick in Britain.

Respectable progress in innovation and R&D from India o In recent years India has made enormous strides in

innovation and research as the driver of economic growth. This has also given a boost to the patenting activity in the country. The number of research publications from India had been stable at around 15,000 papers per year until 2000, when there was a pronounced upturn. In the last five years, they have grown 45% to cross 25,000 mark. Since the late 1980’s the citations India receives has considerably increased. For instance, research papers from India received 256,253 citations in the last five years showing a fourfold increase since the 1980’s.

Some facts and figures about our transport sector o The growth in commercial vehicle segment in the recent

years (2002 to 2007) has been partly due to Government’s highway building programme. Yet only 7,500 km of the planned 25,000 km has been built.

o State transport corporations have a total fleet strength of just over 100,000 in a country where 1.4 mn cars and multi vehicles are sold each year.

o Of a total truck fleet of 2.8 mn, around a million are estimated to be more than 12 years old indicating a huge potential for replacement demand though the realization of this demand would depend on how strict regulators are about phasing out ageing vehicles.

On judicial activism o Recently we noted the contents of a Supreme Court

judgment about judicial activism. A topic like this is bound to generate lot of heat and did for sure.

o There are strong views expressed both for and against the issue. Striking a judicious balance by the Court while taking up issues that will have a potential of trespassing the jurisdictions of the executive and legislature, will remain a challenge for it as long as it exists. While we cannot find any fault with a legal luminary like Justice (Retd.) VR Krishna Iyer describing judicial activism as the ‘oxygen of rule of law’, how many of the legal fraternity can this ‘oxygen’ be trusted with, without their trampling on the domains of the other two pillars of democracy?

o I explained to you what is ‘obiter dicta’ while noting on this subject earlier. One more legal phrase that is worth our

attention is ‘ratio decidendi.’ It means the reason or rationale behind the decision in the judgment.

We have heard of hybrid vehicles. But hybrid ships? o Their time too appears to have come. o A giant kite designed to help slash the spiraling cost of fuel

consumption could herald these hybrid ships. o This kite is tethered to the bow of the ship. Flying at a

height of 100 to 300 meters, this will tug the ship along, allowing it to operate its engines at reduced speeds, thus cutting back on fuel consumption.

Language lessons o W00t: Merriam Webster’s dictionary has selected this as

the word of the year. o This is often used in the online gaming world. It is used to

express joy – it could be a triumph or for no reason at all. o It stands for “we owned the other team.” o Notice that the word has zeroes between the letters ‘w’

and ‘t’ in it.

Payback time for scamsters o There is hope at last for investors who have been

defrauded in IPO scams. o The Justice Wadhwa committee that has been constituted

by SEBI to compensate individual investors has worked out a compensation of Rs. 92 crore for investors who had applied for shares in the retail category in 21 IPOs during 2005-06.

o A recap about how the IPO scam was unveiled by the perpetrators:

Operators put in thousands of fictitious applications in IPOs in retail category.

Thousands of bank and demat accounts were opened in the names of fictitious entities.

Post-allotment, operators transferred shares to another set of players.

The players in turn transferred shares to financiers who had provided funds for investing in the IPOs.

Shares were then sold on the first day of listing, making huge gains.

What is a reverse merger? o When a listed company acquires an unlisted company

giving the unlisted company the status of a listed company, that is called reverse merger.

o India has not been having many such reverse mergers. But in US it is quite common.

o But of late we are seeing such transactions in India also.

Low penetration of households in equity culture o A mere 5% of household financial savings are in stocks and

debentures in India. Exploration of oil and natural gas blocks

o We have noted on this subject recently while covering about NELP VII. Something more worthwhile coming our way includes:

o The unavailability of oil rigs seems to have curtailed the blocks on offer. Only about 18 new blocks have been put up for bidding this time, as 24 of the blocks were relinquished by earlier bidders and another 15 blocks have had no takers in previous bidding rounds.

o What is meant by more transparent bidding conditions? For example, declaring upfront the numerical

weightages for different bid criteria and various sub-parameters.

o Just over a third of the country’s sedimentary basins have been explored to any real extent. Estimates suggest in situ crude of over 1 bn tonnes. We need to have in place a world class regulatory regime to coagulate funds flow in the sector.

The new buzzword: de-coupling o While globalization was the buzzword till recently, it

appears to be the turn of ‘de-coupling’ this time. o It refers to the apparent disconnect between how the rest

of the world sees the future and how we (India) see it. The world is no longer one big global village; the belief that India and other emerging markets can go their own way regardless of what happens in the advanced world, is gaining ground.

A very good piece from Rahul Bajaj o Many a time he is dubbed as the leader of the ‘Bombay

Club’ and a retrograde person when it comes to his views on opening up of our economy and further liberalization. But if you read his today’s article, he surely comes off as a reasonable person. He gives irrefutable evidence of the double standards that the west and developed world follow. I am convinced of his arguments. Take a look at some excerpts and my interpretation of his argument.

o The focus of his argument is that the cause of the appreciating rupee is not any sound strengthening of the economy. A rise of the currency backed by a consistent strengthening of the economy over the longer run can never be found fault with. But the rupee’s rise is attributable to the massive inflow of foreign funds – the FII inflows, which are short term and speculative in nature.

o When the Asian financial crisis occurred, IMF advice made matters worse. But in tackling the recent subprime crisis, the developed world had done just the opposite of what it advised the developing world during the Asian financial crisis. It bailed out the Northern Rock bank in England and infused liquidity by establishing a $100 bn bailout fund; measures which it would have seen as moral hazards, had they been done by the developing world.

o So, it would be unwise not to keep any checks on capital inflows into the country at this juncture.

o Experience in Chile (where it mandated that a certain portion of the inflows would be retained with the Central Bank in non-interest earning deposits) and the findings of the NBER (National Bureau of Economic Research of US) that the capital controls placed by Malaysia and Thailand have helped in reducing the real exchange rate pressures, confirm that we should find solutions to our problems rather than follow someone else’s prescriptions.

Detonators in mining and security o I was recently on a visit to a detonator manufacturing

company. I found that most of the employees are not highly educated and could perhaps be easily carried away by some misguided elements into following some wrong philosophies. I was shuddering at the possibility of the detonators being smuggled out by the employees of the company and quizzed the head of the company about it. Though he showed the systems that are there in place to ensure strict accounting; I remained a bit skeptical.

o Today’s news item which is reporting the possible separation of possession and sale of explosives does point to the right direction. The proposed changes in law mean that the company licensed to sell explosives would not be allowed to use them and a company licensed to use explosives would not be allowed to sell them. This can put a lid on the possible ‘leakages’ that can occur in the system.

Protection of public servants o With the recent spate of attacks on junior doctors and the

resultant strikes by them in AP, the issue of protection of public servants while performing their duty has occupied public mind.

o Section 353 of Indian Penal Code laid down that assault or use of criminal force to deter a public servant from the discharge of his duties was a punishable offence with imprisonment of a term of two years or with fine.

Integrating EU

o The EU is on course to extending the Schengen borderless area to 9 more countries this week.

o EU citizenship guarantees right of entry into all the 27 members states regardless of one’s circumstances.

o The 1985 Schengen Agreement is an agreement among some European countries which allows for the abolition of systematic border controls between the participating countries. It also includes provisions on common policy on the temporary entry of persons (including the Schengen Visa), the harmonisation of external border controls, and cross-border police co-operation. By the 1999 Treaty of Amsterdam, the agreement itself and all decisions having been enacted on its basis had been implemented into the law of the European Union.

o A total of 30 states, including all European Union states and three non-EU members (Iceland, Norway, and Switzerland), have signed the agreement, and 15 have implemented it so far. The Republic of Ireland and the United Kingdom only take part in the police co-operation measures and not the common border control and visa provisions. Border posts and checks have been removed in the Schengen area states and a common 'Schengen visa' allows tourist or visitor access to the area.

Surprising but true!!! o The bald or hairy rule; the rule of thumb for Russian

leaders. o In the last 130 years of Russian history, the position of the

head of state, has religiously alternated between a bald person and a hairy person.

o This was from 1881 when the balding Alexander III took over from his hairy father.

India’s F1 win o Narain Karthikeyan won his maiden A1 GP race at the

Zhuhai International Circuit in China yesterday. o The last time he won a race was when he clinched the

Spanish leg of the Nissan World Series in October, 2004.

Information on energy conservation o Once in a way some articles appear in papers that are

simply worth a read. They give you lot of information and perspective which is very difficult to get by going through notes prepared by somebody else. I would add today’s article by Gem Paul on energy conservation that appeared in today’s ET to this category.

India in the top bracket when it comes to small car segment

o It has shown 18% CAGR (Compounded Annual Growth Rate) in passenger car sales over the past four years. This has placed India among the top three compact markets globally, behind Japan and Brazil.

The DMIC control to be offered to private sector o The government is planning to offer up to 51% stake in the

$90 bn Delhi-Mumbai Industrial Corridor to financial investors.

o About 4% equity stake in the company would be held by the six states (which are stakeholders in the project: UP, Delhi, Haryana, Rajasthan, Gujarat & Maharashtra) each and 25% would be held by the Centre.

About NELPs o NELP: New Exploration and Licensing Policy. It is through

the NELP rounds of bidding that the government is offering various blocks in the country for oil and natural gas exploration.

o So far six rounds of NELP have been taken up. About $8 bn investments have been committed in these six rounds so far. Of this about $4 bn has been spent till March 2007 by exploration companies. A total of 162 blocks have been awarded in these six rounds. About 49 oil and gas discoveries have been reported, accreting over 600 mn tons of reserves.

o Through the currently ongoing NELP VII round of bidding an investment of $3.5 bn is being expected by the government.

IRRI warns of global rice crisis o A global rice shortage is possible in the short run unless

cultivation is improved, says IRRI, the International Rice Research Institute based in Manila, Philippines.

o The world is already eating more rice than is harvested annually, because of rising populations and economic growth.

o Nearly half the planet’s 6.6 bn population depends on rice to survive and demand for the grain is expected to increase by 50% by 2030.

o Average rice prices have nearly doubled to around $325 per tonne in the past six years.

More info on Bali meet o REDD: Reduced Emissions from Deforestation in

Developing countries. o Under this scheme, preservation of forests could become a

tradable commodity with the potential to earn poor nations billions of dollars from trading carbon credits.

Comment on campus rage

o Recently a class VIII student in a Gurgaon private school has shot his classmate that resulted in the death of the latter. This brought images of the US based school/college shooting incidents that killed many people, to our minds. A couple of editorial comments in The Hindu on this incident are worth noting:

o Although the Arms Act is silent on the penalties for failing to secure a weapon, Section 340-A of the Indian Penal Code provides for punishment for causing death by negligence. This comment is in connection with the reported fact that the boy had taken his father’s revolver from home to shoot his school mate.

o The Arms Act provides for strict licensing procedures: licences are given after an inquiry, as deemed necessary by the licensing authority, and need to be renewed every three years. But there are clearly problems of implementation. Not changes in the law, but strict enforcement of existing regulations and exercise of great responsibility by gun licence holder should be the first steps if Indian schools are not to endure similar horrors in future.

A special coin - Shahenshah o It is a pure gold coin weighing 100 tolas (1166 gms). It was

got minted by Shah Jahan and presented to the Caliph. o He did so to get the pardon of Caliph as the latter had

excommunicated his father, Jehangir and his successors as he had issued coins bearing his (Jehangir’s) portrait and violated the tenets of Islam.

o This coin has had an interesting journey. It was inherited by an Arab princess who brought it as dowry when she married the Nawab of Bahawalpur. Later, their daughter took it to London, from where it came to Mumbai. It is currently with numismatist Dinesh Mody.

India urges the rich to walk the talk on climate change; at the Bali meet

o India with more than a billion people, is the world’s fourth largest emitter behind the US, China and Russia, and is projected to account for a rising share of global carbon emissions as it burns more fuel to try to end poverty.

o But India defended its policies, saying its per capita emissions were far below the global average. India has promised that per capita emissions will never reach those of developed nations.

o The country’s per capita emissions were low at 0.25 tonnes of carbon in 2001, a quarter of the world average and 22 times less than the US.

o While this is so, the US is blocking progress at Bali says Al Gore, the former US Vice President and Nobel laureate. He was referring to the US refusal to accede to the guidelines being proposed for adherence by 2020. He was hoping the new treaty to be completed by December 2009 in Copenhagen.

o Sweden is the first country to impose a carbon tax in 1991. Yet another Indian heads an MNC; this time the Citigroup

o The Citigroup which has been in the news of late for the wrong reasons – it got mauled by the subprime mess – will now be headed by an Indian, Mr. Vikram Pandit. He joins the ranks of Indra Nooyi (Pepsi) and Arun Sarin (Vodafone) on the international corporate scene.

Voices of customers and investors vs. those of citizens o Writing about Indian democracy, Arun Maira explains how

what is good for stock markets and corporations is not necessarily good for a majority of the people. Look at the following excerpt:

o An analysis by Robert Reich runs like this: The institutions of capitalism that enable masses to participate in the economy as customers and investors — business corporations, investment funds, etc — have progressively gained power. Whereas institutions that aggregate their interests as citizens — labour unions, neighbourhood associations, etc — have withered. Therefore voices of customers and investors are heard more loudly, and voices of citizens are drowned out. Thus, ‘capitalism has invaded democracy’, and the calculus of economic efficiency has replaced judgements of social harmony. Almost everyone in the US is a customer of many corporate products and services and by 2005, the majority of US households also owned company stocks. Therefore, even if their voices as citizens are not heard, almost all Americans participate in the economy as customers and investors.

o On the other hand, less than 5% of India’s population participates in the stock market, and many millions are not even customers of large corporations. Therefore, what is good for corporations and stock markets in India cannot be presumed to be good for the majority of people. For more economic progress with less friction, and more social harmony, the voices of the citizen within all Indians must be heard, not just the demands of customers and investors.

Oil regulator writes to government about price tampering o The newly constituted petroleum and natural gas regulator

has written to the government against tampering with fuel prices and distortion of market forces.

o The prices of petroleum products are kept artificially low for about 18 months, impacting the health of oil marketing companies. The price of auto fuel was last increased in June 2006. While public sector OMCs are losing Rs. 6.34 per litre on the sale of petrol, they are losing Rs. 7.88 per litre on sale of diesel.

Price preference for SMEs to get legal cover o Public sector companies and state agencies may soon be

legally bound to give preference for SMEs in bidding process. While a 15% price preference is given to SMEs under NSIC (National Small Industries Corporation) Scheme, some PSEs and states are not extending the same to them.

o Some of the preference provisions include: issue of tenders free of cost, exemption from payment of earnest money deposit, waiver of security deposit up to a certain limit and price preference of 15% over the quotations of the large scale industries.

o

o Geothermal energy

o In India the places that have geothermal potential include Ladakh, Himachal Pradesh and Andaman islands.

o Geothermal plants produce electricity by tapping heat in the steam hidden beneath the surface of the earth.

o The capital requirement for geothermal energy works out to Rs. 10 to 12 crores per MW compared to Rs. 6 to 7 crore per MW for hydro power.

o Geothermal plants typically have a high plant load factor of 80 to 85% and there is hardly any operational cost involved in running these plants.

Human evolution is happening fast o People today are genetically more different from people

who lived 5000 years ago. They in turn were different from Neanderthals who vanished 30,000 years ago.

o The changes have been driven by colossal growth in the human population – from a few million to 6.5 bn in the past 10,000 years – with people moving into new environments to which they needed to adapt.

o Most of the evolutionary changes happened in the last 10,000 years basically corresponding to population growth after agriculture is invented.

PSEs and bonus issue

o Of the 83 listed PSUs, 52 companies have reported accumulated reserves and surplus that were more than three times their respective paid up capital during the financial year 2007.

o This, when viewed in the backdrop of the DPE (Department of Public Enterprises) guidelines and the government’s instructions to IOC, may hint at a possibility of bonus announcement by these PSUs.

Supreme Court notices judicial activism with caution o While passing a judgment in the golf club case (wherein it

struck down the Punjab and Haryana High court decision directing a golf club to create a formal post to which a mali should be appointed), the Supreme Court has called for a halt to excessive judicial activism. The observations of the Supreme Court are called ‘obiter dicta’ in judicial parlance. That means that these observations will not have the strength and force of a judgment. But nevertheless they make clear to the country the ‘sense’ of the court.

o Do you remember the phrase ‘sense of the house’ being used in the context of the Indo US nuclear deal? It is something akin to that.

On SSI de-reservation o The list of items meant for exclusive production by SSI

sector has come down from 836 items in 2001 to 114 at present.

o In many categories where capacity constraints exist, there has been a pruning down of key items from the domain of restrictions.

o The result of de-reservation has been broadly positive. Experience shows that companies engaged in small-scale production, which have survived the downturn of the ’90s, have emerged stronger and even outperformed their counterparts in the large industry by a huge margin. This is confirmed by the Economic Survey which mentions that, between 2001 and 2005, average production in the SSI unit increased by 10.6% while employment actually grew by 4.4% unlike the case of medium and large industry during this period. Similarly, smaller companies have done better than larger ones in terms of growth in net sales and operating profits. In fact, companies with net turnover of Rs 1 crore to Rs 50 crore have reported a 701% profit between 2001 and 2006 as compared to 169% for large companies. And all this growth has taken place at a time when items were being taken off the reserved list.

o Yet complete de-reservation may neither be feasible nor desirable as reservation may still be meaningful for items

such as agarbattis produced in the cottage industry. Hence, it would be beneficial to ascertain and evaluate the worth of each item and assess its likely impact before going in for de-reservation. And this should be completed within a certain time frame. This would help small-scale capital, labour and entrepreneurship to rearrange, amalgamate and build economies of scale as also develop the requisite strength to compete.

o The process of de-reservation should be accompanied by provision of requisite infrastructure and institutional support which will help SSIs to effect vertical integration with larger units. Its problems of technology, skills, marketing and finance deserve special consideration. After all, SSIs offers huge employment and export potential, which could be ignored only at our own peril.

The Benami Act is in for a overhaul o Enacted by the Parliament about 19 years ago (1988), the

Act has still not come into effect because the CBDT (Central Board of Direct Taxes) which was entrusted with the task of framing the rules has not yet done so.

o The government is considering changes to the Act following pressure from international quarters on India to tighten its anti-laundering Act.

o A tightened Benami Act can aid the PMLA (Prevention of Money Laundering Act) to fight terror-funding effectively.

o A ‘benami transaction’ is one in which property is transferred to a person for a consideration paid or provided by another person essentially.

RIL goes to Australia in search of Uranium o Reliance Industries has struck a deal to explore uranium in

Australia as soaring demand and prices turn the yellow metal into a lucrative commodity.

o It has acquired a 49% stake in eight exploration blocks owned by Uranium Exploration Australia.

o India bans private sector participation in uranium exploration and mining.

Retail market set to double in 3 years to $30 bn o The organized retail market is set to touch this figure in the

ensuing three years. At present its share is a meagre 5% of the total retail market in the country.

What is a 419 fraud? o This is also known as the advance fee fraud, or more

commonly the Nigerian email fraud. o Most people with an email account would have at some

point received an email seeking assistance in transferring

money belonging to a deposed/dead politician overseas. The writer claims to be an associate of the account holder and often seeks a relatively small amount to be remitted towards fees. The fraud gets its name from Section 419 of Nigerian Criminal Code, which refers to obtaining property under false pretenses.

RBI warns against fraudulent remittance offers o Of late another type of email that we receive is announcing

our email having been declared a winner in an online lottery. The ultimate aim of the sender is to collect some money from us towards the costs of claiming the prize money in the lottery.

o RBI clarified that remittance in any form towards participation in lottery schemes is prohibited under the FEMA.

IOC bonus issue o According to government guidelines, PSEs (Public Sector

Enterprises) should consider a bonus issue if reserves to equity ratio exceeds three.

o As IOC is reportedly struggling with over Rs. 200 crore a day loss because of government mandated pricing of petroleum products, it does not make sense to force it to issue bonus shares.

Why are small savings deposits in Post Offices (National Small Savings Fund) important for state governments?

o A decline in the growth of the fresh accretions to the post office savings schemes has implications for financially week state. States are mandatorily required to borrow from the NSSF to part finance their annual budget and the share of state’s borrowing from the NSSF depends on fresh collection in that state. To cover shortfalls in their expenditure plans, many states may be forced to borrow from the open market. For a state with a poor financial record, such market borrowings would be more expensive than loans from the NSSF.

o The government’s decision to restore bonus at the rate of 5% on the 6 year 8% monthly income schemes upon maturity will make returns on such deposits comparable with the yield on bank deposits and government securities.

o Do you know how much money is invested all over the country in such post office deposit accounts?

Rs. 4.59 lakh crores. This is invested in about 16 crore accounts.

Another way of looking at carbon trading o It is a good article which gives a different perspective on

carbon trading. Look at it here. Some excerpts from it:

o The global community led by the Intergovernmental Panel on Climate Change agreed upon the Kyoto Protocol in 1997 (ratified in 2005) where Annex I countries (38 industrialised/developed countries) agreed to reduce their GHG emissions by 2008-2012 to an average of about 5% below their 1990 levels.

o The Kyoto targets range from +10% (Iceland) to -8% (EU). The developing countries were exempt from targets at Kyoto. This indicates differentiated responsibility. However, the basis for targets seems to be emissions in a predefined base year. This implies that countries that have higher emissions due to higher per capita energy use would be entitled to higher targets.

o At present, the volumes of certified emission reductions of carbon dioxide (CERs) recorded annually by the UNFCCC (UN agency regulating the emission reduction) are 174 million tonnes. The price for CERs is kept quite low (less than $20 per CER).

o India, a country hosting 17% of the world population has contributed only 2.4% to the total accumulated emissions since 1750. The annual per capita energy consumption in the country is very low (0.53 tonnes of oil equivalent per person), whereas the average per capita electricity consumption in India is about 450 kWh per year — less than 1/5th of the world average and 1/30th of the US average. The economy is growing at the rate of 8%-10% in the past few years and the energy demand is on the rise.

o The article asks a very pertinent question: There is a belief that carbon trading offers a golden

opportunity for developing countries like India to get foreign funds. However, is it ethical for richer countries to continue to contribute more than their share of global carbon emissions by buying ‘cheaper’ emission reduction opportunities in poorer countries?

“Whenever you see rubber, think of Kerala” o The above can perhaps be the tag line that all of us can

find some reason in. (I was just recollecting the Jenson and Nicholson ad.)

o But Tripura? I was surprised to know that it is the second largest producer of rubber in India.

o India’s second rubber-based industrial park is being set up in this state to bring about a natural revolution in the elastic polymer industry.

o It is moves like these that will ultimately integrate the northeast into the mainstream. These will deliver what could not be delivered by all the talks with the insurgent

groups operating in the NE region. Such development results in a Win/Win situation for the country as well as the locals there. Then surely their disgruntlement will disappear and they would want to remain as part of India.

Remember the Poabs estate? o It is the only Demeter-certified biodynamic organic coffee

estate in India. o Its 350 acre Thuthampara estate is on a lease from the

government of Kerala since 1995. Now the Kerala government does not want to renew the lease.

o This is one of the two largest biodynamic organic estates in the world. The other is in Mexico.

Infrastructure status to coal o With the ECC (Energy Coordination Committee) headed by

the PM himself favouring this move, the ensuing budget is expected to extend infrastructure status to coal.

o What does it mean? It would entitle companies in the sector for a 10 year

tax holiday period. Under section 80-IA(2) of the IT Act a deduction of 100% profit is available to companies for any 10 consecutive years out of the first 15 years.

o The other sectors that are already awarded this status include: road, railway, oil and oil and gas pipeline industries.

Maintenance of the Welfare of Parents and other Senior Citizens Bill 2007

o It was passed by both the Houses of Parliament last week. o An earlier enactment that is there on the subject was the

Parents Act which provided for the maintenance of those over 60 years of age by their adult children, grandchildren and legal heirs.

India among the top 10 intangible economies of the world!!! o In the knowledge driven global marketplace, where

intangible assets such as intellectual property, brand, customer relationship and talent hold much more value than tangible ‘value’ assets such as capital, land, building, factories et al, India emerges at the top of the podium, head and shoulders above all developed countries and blocs, barring the US and Switzerland.

o This is according to a report by Brand Finance Institute titled “Global Intangible Tracker 2007.”

o India has an estimated intangible asset component of 74% (equal to Switzerland’s) compared to 75% of the US.

Company secretaries to advertise their services

o We have noted sometime back that our lawyers cannot advertise their services.

o But the Institute of Company Secretaries of India (ICSI), the regulatory body that governs the profession is going to allow company secretaries to advertise in print, electronic and internet media from January 1, 2008.

o ICSI President: Priti Malhotra. Utilizing JNNURM funds

o To access these funds, states would have to show some reforms such as reduction in stamp duty to a maximum of 5%.

o Ever wondered what is a ‘master plan’ for a town/city? It should detail the course it wants to take over a

period of time. It must ensure adequate public spaces, good intra-city and suburban transport and housing for different strata of society to build harmonious cities.

Some good commentary on subsidies from UR Bhat o If the nation has to make headway in the fight against

poverty, the way out is not more subsidies but executing a concerted plan of action to improve the productivity, profitability and sustainability of the small farmer.

o Several cross-country studies have established that GDP growth originating from agriculture is at least twice as effective in reducing poverty as growth in non-agricultural GDP.

o What can sustain a bull run in the long term? The ability of governments to reform their

economies, build efficient and sustainable institutions and free up the corporate sector to develop and make profits.

Some more important snippets that appeared in another article today

o Aggregate employment in large private sector industries increased by an annual compounded rate of 0.9% during 1993-94 to 2001-02, whereas it declined by 0.4% in the public sector.

o The private sector’s share in the country’s organized sector employment increased from 25.6% to 27.6% over this period, whereas the public sector’s share declined from 71% to 69%.

o Currently 50% of India’s GDP is generated in its cities, which is expected to reach 65% by 2011. (Should we take this an indicator of more urbanization? Or should we see it as a pointer to making rural India the focus of our economy expansion initiative?)

o There are currently 73 municipal corporations, 1770 municipal councils and 229 town area committees and 717 notified area committees in the country.

o Two of the unique experiments done by some cities in India:

Ahmedabad Municipal Corporation was the first local body to tap the capital market to obtain funds through issue of a bond. It did it 1996.

Indore has come up with a programme of 50:50 funding, in which citizens of a jurisdiction get their roads revamped from a private contractor by mobilizing 50% of the bill and municipal corporation foots the remaining 50% of the bill.

See how unnoticed can developments go? o The 8th EU India annual summit was held recently in Delhi.

It was devoted to a reaffirmation of the common foundations of pluralism, democracy, respect for human rights, and multilateralism.

o It was noticed more for the absence of a high profile character of the previous summit.

Understanding Russia o . o See how deftly Vladimir Putin seems to be moving ahead

with his political agenda. Perhaps we should expect him back in the saddle circa 2012.

o I think we should be working more vigorously with Russia on improving the ties. Russia has always been a very reliable partner in progress with our country. The recent blips that are noticed are a cause for worry. We should never allow the relations to drift further apart.

Is it time for NPT’s obituary? o It is one more very important article for Political Science

students. o The NPT was agreed to by 188 countries and embraces

almost the entire comity of nations. It deserves to be denounced more for its emphasis on containing proliferation than for its commitment to disarmament of the existing nuclear powers.

India’s 17th GM in Chess o It is Abhijeet Gupta. He achieved it in the Parvsnath

Commonwealth championships at the Siri Fort Sports Complex, New Delhi.

o Sahaz Grover, the 12 year old kid has earned the IM norm in the same tournament.

Cricket

o At last Ganguly seems to be gaining his form back as a batsman.

o He made a good 239 runs against Pakistan in Bangalore’s Chinnaswamy Stadium in the third test.

IOC to issue bonus shares o Government is the biggest shareholder in IOC with over

80% stock. o Its reserves and surplus have mounted to Rs. 33,689 crores

– almost 29 times over its paid up capital of Rs. 1168 crores.

o Bonus shares are additional shares issued to the existing shareholders free of cost. They are issued by cashing in on the company’s free reserves. A company accumulates reserves by retaining part of its profit (not paying as a dividend) over a period. When free reserves increase beyond a certain level, the company issues bonus shares by converting part of its reserves into capital. Issuance of bonus shares would mean more number of IOC shares would be traded in the market.

o But with the national oil companies losing about Rs. 240 crores a day on retail fuel sales, does this make sense?

Ownership, road space restrictions in the pipeline for cars? o A committee chaired by Planning Commission member

Anwarul Hoda is proposing the setting up of a regulatory transport body, which would have the power to enforce physical restrictions on the use of personal vehicles and limit the availability of road space for them. The regulator would set a cap on the number of cars per household by restricting ownership of vehicles and also wield powers to suspend and cancel licenses in case of traffic violations and accidents.

o Are you game? US attempts at tackling the subprime mess

o The US government is proposing a rate freeze that will be available only to people who have not missed any mortgage payments. It will also apply only to loans taken out between 2005 and July 31, 2007, and are scheduled for rate boosts between January 1, 2008 and July 31, 2010.

o According to estimates only about 145,000 households will qualify for this rate freeze. The plan is aimed at stemming foreclosures that have shot up to record highs. The idea behind the plan is that the 5-year rate freeze will buy time for housing sales and prices to start rising again. Such a

rebound would enable home-owners to refinance their current ARMs (Adjustable Rate Mortgages) into fixed rate loans with more affordable monthly payments. But some people who want to buy homes and have been priced out of the market are upset there is no help in sight for them.

The rise of forex reserves slows down o The rush of foreign capital into the country has slowed

down. The reserves accretion is now less than $1 bn dollars in a single week. After SEBI tightened the norms for foreign investments through P-notes in October end, FIIs have gone slow in their investments. Also inflows through the ECB route have slowed down after government imposed end-use restrictions.

o The reserves are currently at $273 bn. More on textile industry owes

o That a 15% appreciation of the rupee against the dollar has severely dented the industry’s competitiveness speaks volumes about the poor fundamentals of the textiles sector. This is largely why despite having an abundant raw material base, broad range of fabric production, cheap labour and large domestic demand, the industry has not benefited from the opening up of the global textile trade to the extent expected.

o A recent CII-Ernst & Young study shows that while China’s share in apparel imports into the EU has risen 11 percentage points in the post-quota regime, India’s is up only three percentage points to 9%. In the case of the US, the gulf is even wider, against 16% earlier, China now has 50% market share.

o The lack of competitiveness of the Indian textile sectors is largely due to lack of scale. This increases production costs and makes technology-adoption difficult. The result: the sector is stuck at the low end of the value chain, making it difficult for it to weather even small shocks.

Why is the government’s reported decision to enforce “uniformity in curriculum” bad?

o It would inhibit innovation and obstruct democratization of knowledge as well.

o The government would do well to learn a few things from the Bologna Process that envisages a common European educational area. The process seeks to preserve the specific nature of every higher education system in the Continent while standardising the system of awarding degrees.

o But such an open education system would, in the long run, be sustainable only if the economy has the capacity to

diversify in tandem with the ever-increasing variety of knowledge.

States may be asked to lower sales tax to cool ATF rates o At present the sales tax on ATF averages 23% for domestic

flights. o There is a demand from the airlines that ATF should be

given a ‘declared goods’ status, thereby attracting a uniform 4% tax across the country.

o ATF price in the country includes customs duty of 10%, excise duty of 8% and sales tax on an average at 23% across the country.

o ATF rates for domestic operations in India are priced 70% more than international benchmarks. The aviation fuel contributes 40% of the operational cost of the airlines.

o The Centre is floating the idea that those states that bring it down will benefit from increased sales happening within its borders. But, will the states bite the bait?

OP Arya committee o It was set up to consider the takeover of closed tea

gardens in Kerala, West Bengal and Assam. The takeover is not nationalization of the tea estates; but is expected to find new owners for the estates, as the estates have been lying closed for a long period.

Bali meet on climate change; some snippets o This meet is being attended by 190 nations to launch

negotiations that will eventually lead to an international accord to succeed the Kyoto Protocol, which expires in 2012.

o The 175-nation Kyoto Protocol requires 36 industrial nations to reduce GHG emissions, by an average 5% below 1990 levels by 2012.

o Saudi Arabia and the US are worst ‘climate sinners’ according to an annual index ranking 56 nations which together account for more than 90% of global CO2 emissions.

India’s interceptor missile test successful o India test fired an advanced anti-ballistic interceptor

missile successfully. o The target surface to surface missile (a Prithvi missile) was

fired first. Then at a little under 3 minutes an interceptor – Advanced Air Defense (AAD) missile – was launched to destroy it at an altitude of 15 km in mid air. At these altitudes it is called an endo-atmospheric intercept.

o India successfully tested an exo-atmospheric interceptor missile PAD-01 in November 2006. It destroyed an incoming missile at an altitude of 50 km.

Andhra Pradesh aims to be the first WiMAX connected state o It plans to invest around Rs. 200 crore over the next one to

two years to ensure vertical and horizontal connectivity in the state departments.

o WiMax is a long-range system, covering many kilometers that typically uses licensed spectrum to deliver a point to point connection to the Internet from an ISP to an end user.

o Wi-Fi is a shorter range system that uses unlicensed spectrum to provide access to a network, typically covering only the network operator’s own property.

Coke’s CEO o Neville Isdell is set to hand over charge to Muhtar Kent on

July 1, 2008. Kent is currently the COO of the company. More subprime figures

o More than 30% of borrowers with subprime adjustable rate mortgages are behind on their payments before their loans reset higher, according to estimates from analysts. It is projected that about 775,000 homes with $143 bn of mortgage debt will go into foreclosure in the next two years.

o Typically a foreclosure is seen as bringing the neighbourhood prices down by about 20%.

Backtesting o As new mutual funds don’t have any past performance to

show for their potential investors, they resort to this. Under this they calculate and show what their results would have been had they been around longer.

Number of tax payers on the rise in India o It is a good sign. Tax compliance in the country is going up.

The number of tax payers has increased from 301.78 lakhs (2003-04) to 319.26 lakhs in 2006-07.

o The number of people filing IT returns has increased from 234.25 lakhs to 275.44 lakhs during the same period.

o Some factors that the FM attributes to this rise are: TDS administration, refund bankers, tax return

preparers scheme, large tax payers unit, E-filing of taxes and business process reengineering.

Solutions to our health care problems Our policy has got fixated unduly on drugs, which

account for only about 15% of total healthcare costs, to the exclusion of spiraling costs of healthcare services, diagnostics and in-hospital treatment.

What is needed more urgently is a functioning public health care system, which can be leveraged for large-scale drug purchases by government at lower prices, provision of public health insurance and some checks on private healthcare providers. This would ensure that healthcare, and not just medicines, becomes affordable.

Jaywalkers o This is a slang used to mean pedestrians who are rather

cavalier about traffic rules, but basically means a dull, stupid person, or one who is unsophisticated, inferior or poor.

What is wrong with our agricultural marketing system? o We have been noting from time to time that the APMC Acts

of the States need to be done away with or reformed. o The present day mandis (agricultural markets) are a legacy

of the 1960’s and the era of perpetual shortages. While it is possible for the manufacturer of industrial goods and services to sell a product anywhere in the country, the farmer is forced to offer his produce to a mandi within a fixed geographical area, usually no larger than a district. The competition in the mandi is tightly controlled by a select group of traders. Price discovery is opaque and the infrastructure barely adequate.

o Once elected, a market committee (comprising of traders and farmers) performs a unique 3-in-1 role: it is at the same time a licensing authority, the regulator and a player in the market. Its tenure is 5 years.

o The balance of power is always in favour of the traders in these committees. This is achieved by limiting the number of market players and exercising bizarre controls over the movement of agricultural commodities from the command area of the mandi. The fee levied by these bodies is actually a tax on farmers, since traders factor this in as a transaction cost to be passed on to the farmer in the form of lower prices.

o It results in lower prices for the farmer, an unduly long chain of intermediaries with concomitant cost escalation and ultimately higher consumer prices of agricultural goods. While the primary producer of agricultural goods in Western Europe and North America usually receives 50% of the supermarket shelf price of a commodity, the average realization of farmer in India ranges from 15 to 20% of the consumer price.

Malaysian Indians problem

o The demonstrators were protesting at the failure of colonial Britain, at the time of Malaysian independence, to protect the rights of ethnic Indians brought in as indentured labourers. Organised under the umbrella of the Hindraf they were trying to link their marginalization in Malaysia to that failure.

o The agitation is against what it feels is the unofficial policy of temple demolition and the steady introduction of Sharia based law. The desecration of Hindu temples began in 1978. Hindraf alleges that it is going on without any hindrance.

Year of Russia o It is about to be organized in India with about 150 events in

2008. o The organizing committee has approved its logo – a white

stork pictured with the colour of the flags of the two countries in the background.

See how air carriers are profiteering! o Almost all airlines show fuel surcharge – which now stands

at Rs. 1650 – under the head of ‘taxes and levies’ though this amount is not deposited with the government. Similar is the case with congestion surcharge of Rs. 150. The actual amount passed on to the government is only the passenger service fee of Rs. 225 per sector.

o Now, as passengers have complained that they are forced to pay Rs. 2025 under the head of ‘taxes and levies’ the government has asked the airlines to either deposit these monies with the government or return them to the customers.

About the NFS network o It stands for National Financial Switch. It comprises of the

national network of ATMs of 27 banks totaling about 16,891 ATMs. It simplifies inter-bank transactions. It picks up transactions from the banks’ respective switches and not from particular ATMs.

o The NFS still does not include SBI and its subsidiaries which have the largest ATM network in the country.

o The NFS was set up in 2004 by IDRBT – Institute for Development of Research in Banking Technologies. IDRBT itself was set up in 1996 by the RBI.

Problems with the textile sector in India o It is a very good article which explains the problems

besetting the textile sector in India. o Status:

Though initially targeted exports for the current year are at $25 bn, it is likely that they will barely touch $18 bn.

India is the third largest cotton producer in the world. Second largest producer of cotton yarn and textiles. Over 60% of world’s installed looms are in India. 22% of the global spindleage is in India. Its wage rates are barely 40 to 50% of the wages in developed countries.

But current share of India in global apparel and textiles market is only $14 bn compared to a global market of $450 bn – which is a paltry 3%.

o Why is this so? Our industry is too fragmented and consists of too

many small players who have not bothered to either create sustainable and strong bonds or even create markets for themselves.

Our industry comprises mostly small-scale, non-integrated spinning, weaving, finishing and apparel making enterprises.

Errors of public health movement o The social, economic and political context during the public

health revolution in the west, when public health became part of their way of life, differed markedly from the situation in developing world. The differences include:

The antibiotic era: The public health revolutions in the west were completed before the introduction of antibiotics.

The illusions of curative medicine: The west won the war over ill-health through provision of adequate housing, reduction of over-crowding, and improved nutrition.

The challenge of the pharmaceutical industry: It profits from disease and ill-health. The developing countries are not able to sustain the onslaught of this profit driven industry.

Vaccinations as a panacea: Vaccination plays into the hands of the pharmaceutical industry.

Medicalisation of public health: Engineering, political, economic, educational, and religious, in addition to medical field, played a key role in establishing public health in the west. That is not happening in developing world.

o The errors of not taking our peculiar context obtaining in India include:

Employing urgency-driven curative medical solutions instead of long-term public health policies.

Mistaking primary care for public health. Reducing public health to a bio-medical perspective.

o India should be focusing on the following alternatives: Social justice and the production of an egalitarian

society. Water, sanitation, housing, nutrition, education, and

employment as basic rights. National statistics and the evaluation of government

policies and programmes. Public health as national interest.

Some facts and figures about new banking channels o The mobile subscriber base in India has touched 250 mn

now and is growing at a scorching pace. o At present nearly 23% of banking transactions are done

through ATMs. o Around 50 bn ATM transactions were done across the world

last year. o Around $300 bn goods and services were purchased

online. Intellectuals and mass base

o SSSA Aiyar on “Why intellectuals have no mass base.” He basically attributes two factors for this:

One is the erosion of the rule of law. We have legislatures, bureaucracies, police and courts to provide voice and justice to the people. But these institutions are corrupt and dysfunctional. For results, you often need money, muscle and influence. Thus when rule of law broke down, people need influence outside the formal institutional framework.

The first reason gave rise to identity politics. National parties claiming to represent all identities have lost ground. In the 1950’s political parties represented all rival ideologies. But recent decades have seen the rise of parties based on caste (BSP, SP, RJD, PMK), religion (BJP, Shiv Sena) and region (TDP, AGP, BJD). In addition to these some other identity based parties are found in Punjab (Akali Dal), TN (the two DMKs) and Kerala (the Christian and Muslim parties).

o Then one more aspect is the transformation of caste system.

It is not simply an instrument of oppression, as city intellectuals sometimes think. Jatis, the operative caste groups at the local level, are self-help groups socially bound to assist members in times of need. They have elaborate internal norms for such assistance. Most jatis are occupational groups and this buttresses their social cohesion. These have become building blocks of mass politics.

o Had India’s organs of state delivered justice and voice regardless of identity, the traditional identity groups may have withered away. In fact, they have got stronger with the erosion, sometimes paralysis, of formal processes.

o Can anybody from sociology background throw in some inputs on this analysis?

Chairman of NABARD o Umesh Chandra Sarangi

Overseas borrowings for power may not pay withholding tax o Withholding tax is levied on interest payments on overseas

borrowings. Depending o the lender’s domicile, the tax rate could be as high as 20%. The tax is intended to counteract tax evasion and tax avoidance either by domestic or international tax payers.

o The power ministry has proposed that the sector be exempted from this tax as well as tax on interest and other payments made to non-residents or a foreign company.

o The above measures are expected to lessen the borrowing costs of the power sector by about 20%.

A recap of the systems of taxation o EEE: Exempt-exempt-exempt. In this, the contributions, the

interest earned and the final redemptions are tax free. Eg., PPF and GPF.

o EET: Exempt-exempt-taxable: In this, the contributions and the interest earned are exempt from tax while the final redemptions are taxable. Eg., NPS (New Pension Scheme)

o Now the pension regulator wants the NPS also to be included under the EEE regime.

Fried food may hike cancer risk in women o Acrylamide is a chemical produced when the food is fried,

grilled or roasted. Research shows that women who take 40 micrograms of acrylamide a day – equivalent to half a pack of biscuits, a portion of chips, or a single packet of crisps – were twice as likely to fall prey to cancer as compared with those who ate much less.

Unorganised workers’ bill

o In its current form the bill covers only those workers who are living below the poverty line. This will thus cover only 26 crore workers. There are 40 crore workers in the unorganized sector constituting more than 94% of country’s total workforce.

o Hence the Left parties have ensured that the bill is taken back to the drawing board by not allowing it to pass the muster of the parliamentary standing committee looking into it.

Benefits of CFL o Compact Fluorescent Lamps help save energy and the

cause of environment conservation. o A CFL that replaces an incandescent lamp can save up to

8.21 units per month. o While regular lamps last for 1000 hours, CFLs could last for

6000 to 8000 hours. o A 20 watt CFL would emit around the same amount of light

as a 100 watt bulb. o New generation CFLs last for an average of 3 years and

provide a saving of 80% in energy consumed. o While CFLs are significantly costlier than incandescent

bulbs, the additional investment typically pays back in less than 3 to 4 months through savings on electricity bills.

Pass-through status for power sector funding o The last budget allowed pass-through status under Section

10(23FB) of the IT Act, only to VC funds (Venture Capital funds) investing in nine sectors. The funds operating in power sector, which used to get pass-through status till last fiscal, lost this facility. The status was allowed only for VC funds investing in biotechnology, information technology, nano-technology, seed research and development, R & D of new chemical entities, dairy industry, poultry industry etc.

o But with a view to ensure adequate funds for the power sector, the government is thinking of restoring this pass-through status to VC funds operating in the power sector. This may happen in the ensuing budget.

Junk bond market o We have noted time and again about deepening of the

corporate bond market. Type “corporate bond” in the search box of the blog and it will take you to all the posts where we have noted about this.

o SEBI is considering allowing corporates to issue bonds after obtaining ratings from a single rating agency and may also allow a disclosure-based regime.

o At present the guidelines require that the debt instruments issued through a public/rights issue shall be of at least investment grade. In a disclosure based regime, it should be left to the investor to decide whether or not to invest in a non-investment grade debt instrument.

o Corporate debt accounts for as much as 25 to 30 percent of GDP in countries like UK and the UK. In our country is very meager.

World Economic Outlook o In today’s centre page article, an excellent graphic

appeared. It is very educative. From the 90’s onwards, it is the emerging market economies that are showing a consistent upward trend. Europe’s has remained flat or declining, while that of Japan’s has been declining. From the beginning of the 21st century the US economy has been on a downward hill.

o Another excerpt worth our attention includes: THE US economy’s natural market dynamism is best

illustrated by the massive churn in its labour market. What analysts tend to focus on is the net number of new jobs added every month, which in recent times has averaged around 200,000. However, the more telling statistic is that over four million people leave their jobs in a single month in the US while nearly 4.5 million new jobs are added. In effect, 3% of the 135 million strong labour force is turned over every month — a staggering number.

GHG emission cuts – a different take o Take a look at today’s article by Kendra Okonski of

International Policy Network. We have been consistently fed on the argument that emission cuts are the solution. But read his article in full and you will find a strong argument in favour of adaptation.

o Remember Darwin’s theory? At one time it struck me too, but I was rather shy of suggesting it. Had you seen Kevin Costner’s movie “Water World” you would understand what I mean. People develop gills to breathe in a catastrophic world filled with water.

o Similarly adaptations – natural and man-made will ensure that the side effects of emissions are handled in ‘their own’ way.

What is the polluter-pays norm? o The assumption that someone who makes something that

releases GHGs into the atmosphere – the producer – ought to be penalized, not the consumer.

o However, India and China for example, are making products for western consumption. Then according the polluter-pays principle, the manufacturers are the polluter and not the people who are consuming. To punish those countries for making the products that consumers in the north want to consume doesn’t sound exactly fair; does it? So asks Yvo De Boer.

o Yvo De Boer who? You should be kidding. He is the Executive Secretary (Chief) of UNFCCC.

What is embedded reporting? o It is providing news media not just with access to the

battlefield but actually including them in with troops. o It has, however, subjected journalists to some severe

restrictions, a certain degree of prior-restraint, and cultivated a narrow, fragmented view of the war, raising issues of professional freedom and responsibility.

Banks refuse dollar loans to exporters o The subprime crisis is having its impact finally on our

exporters. Let’s take a look at how. o Indian banks draw foreign currency credit lines from

international banks to lend to local exporters. These credit lines have now dried up with the subprime fiasco severely impacting the global money market.

o With high-street banks in the US and Europe even reluctant to lend to each other in the term-money market, they are in no mood to extend credit lines to Indian banks. And even if they do, it will be at a price that the local banks can’t afford.

o So what gets affected badly is the PCFC – Packing Credit Foreign Currency -- loans that are badly required by our exporters. Exporters use these loans to process goods and also to import raw materials. As interest on such loans usually was lower than the rupee loans it helps them to lower cost.

o This is an example of systemic impact. Now perhaps you may appreciate well what I meant by systemic impact sometime back while noting on this issue?

Subprime crisis is a systemic crisis and a global contagion o So says CRL Narasimhan in The Hindu today. o As the crisis rolls on engulfing the broader credit market,

there are definite indications that it has acquired all the characteristics of a systemic risk calling for coordinated action by the policy makers. Banks with lesser capital would obviously lend less to the more productive sectors. It

is not just the housing sector but the whole economy that may suffer for want of bank loans.

Japan’s robots lock horns for world champ title o Tokyo is hosting the 12th Robo-One Grand Championship

match. o To win the tournament and the title of the strongest two-

legged fighting robot, contestants need to able to keep their balance while punching and dodging blows, and get up when pushed down.

More about Islamic banking o Want to know more about it? Then you must read today’s

interview with Hussein Hamid Hassan, who is considered as the father of Islamic finance. We have noted some basics about it sometime back in our blogs. Some additional points worth our noting are:

o Conventional banks are not permitted to invest deposits at all, but can only lend them to investors. Islamic bank doesn’t receive deposits with fixed interest rates. Rather, the deposits are in the form of equity from depositors to be invested, along with shareholder’s equity in one common pool.

o The first Islamic bank was set up in 1975. Competition Commission of India

o Its acting Chairman is Vinod Dhall. FM Chidambaram admits to some failures

o He said that the financial sector reform is one area of disappointment in an otherwise praiseworthy reform track record of the ruling coalition. The failures as noted by him are:

o Raising of FDI investment limits in insurance from the present 26%.

o The banking reforms bill. o The bill to give statutory powers to the pension regulator

PFRDA. o The gap between the outlays and outcomes. Here he was

referring to the fact that outlays have increased four times in education and two times in health between 2004-05 and 2007-08. But he says he has some reservations on their outcomes.

The case for OPCs o OPC: One Person Companies. o Today’s ET editorial makes a strong case for them. o The world over, OPC structure is favoured by top

executives striking out on their own after exiting full-time employment with a company. This enables an entrepreneur to take more risks, given that the

shareholder’s liability is limited to his equity investment in the venture.

o It allows tremendous flexibility to the entrepreneur as he need not find another shareholder or director. The existing Companies Act mandates that a private limited company needs at least two shareholders.

o It allows for easier and faster decision making. o It also enables lower tax liability. o As the JJ Irani committee on overhauling the Companies Act

has recommended this new structure in its 2005 report, it needs to be given a leg up. Countries such as China and Qatar have allowed the creation of such companies over the past couple of years.

Biopiracy o The practice of patenting properties of products like neem

and turmeric which have been used for centuries. o India has been a victim of biopiracy as there have been

several attempts, especially in the US, to patent such uses. o So developing countries actively aided by the LDCs (Least

Developed Countries) are seeking incorporation of disclosure norms in the TRIPS agreement to counter biopiracy.

Indian Register of Shipping o It is facing some trouble as a substantial number of

employees are leaving it enmasse, protesting against some management decisions.

o Its Chairman is Capt. JC Anand. o It is India’s one and only ship registry. It has been

undertaking certain flag state control functions such as surveys and certification and some other statutory obligations on behalf of the DGS – Directorate General of Shipping.

o It was set up in 1975. It has become one of the top 10 classification societies in the world. Over 1100 ships are classed with IRS, including some from Greece, Thailand and Sri Lanka.

EFA – European Film Academy awards o Helen Mirren won the best actress award for her

performance in “The Queen”. She won the Oscar and also at the Venice Film Festival earlier in the year.

o The uniqueness of EFA awards is that they are held in their home city – Berlin in odd years and in different European cities in even years.

Goa and Portugal connection

o The Portuguese colonized Goa in the early 16th century after Vasco da Gama discovered a sea route to India in 1498. Their rule ended in 1961.

Russia goes to polls o The party backed by President Putin – United Russia – is

tipped to win a majority of the seats in the 450 member State Duma (Lower House).

o Vladimir Putin’s second and last term as President is due to expire next year and Russians will be choosing their next President in March.

o But President Putin is largely expected to retain some control over his successor.

Gillian Gibbons o She is a British school teacher who is sentenced to 15

days’ imprisonment in Sudan for allegedly “insulting” the Prophet by allowing her pupils to name a teddy bear Muhammad.

o This incident has received lot of condemnation from many muslims from across the world.

Russia seeks to reassert itself on the world stage o It is a very good article that appeared in today’s Hindu. A

must read for students of Political Science and International Affairs.

Behind the Adivasi unrest in Assam o It is yet another important article that appeared in today’s

Hindu. Explains the reasons behind the unrest. o The main problem appears to lie with the rules which say

that a person’s tribal identity is irrevocably and forever linked to her or his place of origin. So when a person migrates to another area, she stands to lose her tribal identity. For a non-tribal, such migration doesn’t result in her losing her socio-cultural coordinates of her identity. This appears to be at the root of the disenchantment of the Adivasis.

Cricket o Muthaiah Murlitharan (Sri Lanka) has equaled the record of

Shane Warne in taking 708 test wickets. In the test match against England at Kandy.

GDP growth o For the second quarter is at 8.9%. A sluggish

manufacturing sector pulled down economic growth. The rate recorded during the corresponding period of previous year was 10.2%.

Dr. C. Rangarajan o Apart from being the head of the Economic Advisory

Council to the PM, he is also the Chairman of a pan-Asian commission studying the impact of HIV/AIDS in the Asian region.

o The commission’s study has been sponsored by UNAIDS, the joint UN programme for HIV/AIDS.

o The commission is due to submit its report in the month of January 2008.

Malaysian Indians issue o The Hindu Rights Action Force (Hindraf) organized a rally

on November 25, seeking the support of Queen Elizabeth II for a class action suit filed in the UK against the exploitation of Indians who were brought to Malaysia as indentured labour.

o The top leaders of the activists of the rally were reportedly charged with sedition. Though the court has ‘discharged’ them from the sedition charges, the issue at heart appears to be not so simple. Malaysia enforced the exclusionary Bhumiputra policy – which discriminates against citizens of other ethnic vintage, vis-à-vis native Malays, in distribution of social goods and even economic opportunities. Active Islamisation of the public sphere by the Malaysian state also appears to be at the heart of the social strife.

o This organization (Hindraf) is headed by one Mr. P. Waythamoorthy.

Taslima Nasrin deletes controversial portions from her book o Bowing to the extremist view that certain paragraphs in

her book “Dwikhondito” have hurt the sentiments of some people, she decided to delete them from the book.

o This book was an autobiographical book written in 2002 in memory of Bangladesh in the 1980’s when military was ruling the country.

o It was banned by the Bengal government on November 23, 2003 but the Kolkata High Court lifted the ban after 22 months.

o Following her decision, Jamait Ulema-e-Hind said that the author was free to return to West Bengal.

Compulsory rural service for medical graduates o The Planning Commission has made a strong case to make

a few years of public service compulsory for all graduates from government medical colleges. This is with a view to improve government’s health care services to the public.

Want to get a lowdown on the way the CDM market is operating? o “The Carbon Gold-diggers.” o Some excerpts follow:

o The Kyoto Protocol was ratified by 41 countries. They agreed to use market-based methods to make an effort to reduce the GHG emissions. The idea is that companies that cannot reduce emissions, buy carbon credits from someone who has set a plantation or created an industrial process that reduces carbon emissions. The trading unit for carbon credits is the CER (Certified Emission Reductions), which helps reduce the emission of 1 metric tone equivalent of carbon dioxide. Eventually, the ‘polluters’ get tired of parting with their money and reform their production process. On the face of it, this should have worked, but this market mechanism got embroiled in a few controversies.

o The ensuing meeting at Bali is expected to tackle four major problem areas with this protocol. Look at the full article to understand the issues involved.

Falling like 9 pins? o The world of Finance CEOs looks very charming from the

outside for mortals like us. But look at the kind of pressure they take and how they fall by the wayside in just a moment!!! The finance people (especially the IIM types amongst you) should brace up for this kind of life. Looks like CEOs are ephemeral; why think of immortality?

o The subprime crisis has the following high-profile casualties:

The latest to join the club is Morgan Stanley’s Zoe Cruz. She was known as the ‘Cruz Missile’ in the Wall Street!

E-Trade Financial’s CEO Mitch Caplan would be stepping down.

Bearn Stern’s head James Cayne will be forced to retire early. He forced President Warren Spector to leave after two hedge funds the firm controlled collapsed from links to subprime mortgages.

o Today’s report says that about $890 bn of subprime US mortgages will have their rates reset next year, peaking in March. That’s close to a tenth of the US GDP!!!

China fires on all cylinders for nuclear power o It is making an investment of about $61 bn to become the

world’s top nuclear power producer by 2020. o It plans to build about 30 new reactors.

Engaging CBI for investigation o CBI derives its powers from the Delhi Special Police

Establishment Act, 1946. Section 6 of the Act lays down that the CBI shall take up investigation of conventional crimes such as murder, kidnapping and rape, either on

reference from the state governments or when directed by the Supreme Court/high courts.

Why is Black Friday so called? o It was so named because many retailers only become profitable for the

year after that day’s revenue.

OLPC programme o One Laptop Per Child project is the brainchild of MIT

professor Nicholas Negroponte. o The project envisages supply of laptops for less than $100

to each school going child in developing countries. Pricing is currently set to start at US$188 and the goal is to reach the $100 mark in 2008.

o Called the XO it is about the size of a textbook and lighter than a lunchbox. It easily assumes several configurations: standard laptop use, e-book reading and gaming.

o It can be solar or foot powered. It will come with at least two of three options: a crank, a pedal, or a pull-cord.

o It has no internal hard disk, has only two internal cables. Creates its own mesh network out of the box, as it is a full-time wireless router. Its life expectancy is about 5 years.

o But most of the sales so far have been in developed countries. Schools in developing countries still lack basic amenities like building, blackboards and benches. People connected with the education sector in developing countries (especially the poorer ones in Africa) are highly skeptical about its success.

o Ever heard of a file called the robots.txt? It is used by web sites to control access by search engines to the hosted content. Though not an official standard, it has become an industry standard by practice since 1994, following concerns that some crawlers were taxing web sites by visiting them repeatedly.

o Now the proposal is to provide extra commands to this text file which could limit how long a search engine can retain copies of content in their indexes, or tell the crawler not to follow any of the links that appear within a web page.

What is the equivalent of ‘subprime’ category of borrowers in India?

o It is called the STPL – Small Ticket Personal Loans. o Banks, especially the private sector ones have been

aggressive in giving such loans. But because of the uproar made about the methods and processes of recovery being adopted by some of the over-enthusiastic recovery agents, banks have developed cold feet now and are going slow on these loans.

o This is sure to drive the borrowers into the hands of the money lenders again.

SPV (Special Purpose Vehicle) for coal acquisition o Coal Ventures International, is being setup by PSUs – NTPC,

SAIL, RINL, NMDC and CIL. o This would scout for coal deals globally by pursuing an

aggressive merger and acquisition strategy. o The Cabinet has cleared the proposal for setting up this

entity. It would have a war chest of Rs. 10,000 crores. o It will have greater powers for making investments. As

against navaratna companies’ limit of Rs. 1000 crores, this entity is given the power to invest upto Rs. 1500 crores at the board level itself.

About MCPs!! o Male chauvinist pigs? No just kidding. I am talking about

Mobile Command Posts. These are the high-tech heavy-duty trucks equipped with GPS-based satellite navigation system, satellite phones, TV cameras and monitors to aid safety measures at the airports.

o These are being deployed at all the 66 airports to tackle aviation emergencies.

Indo-ASEAN FTA talks o how India has been very reasonable in accommodating the

concerns of ASEAN nations in the FTA talks o It argues that supply of food items in general will need to

be enhanced substantially over the next decade as more and more Indians will rise above the poverty line. India will need to end up producing more and may be importing even more, to provide food security. Hence haggling over bound rates, in these talks may not be making sense; when we can actually appear more magnanimous and strike deals with the ASEAN nations.

o Actual weighted average duties on imported food items is less than 35% but bindings are over 100%.

The Annapolis conference o the Palestine issue. The US has organized a Mid-East peace

conference in Annapolis in USA. The joint understanding of all the participants was that Israeli and Palestinian governments must negotiate a peace treaty by the end of 2008.

Peter Mandelson praises India’s role in world economy!! o In an article arguing for a EU-India FTA, the EU Trade

Commissioner has eulogized Indian economic achievement. Look at the substance of his averments:

o It is a mark of India’s growing weight in the world, alongside China, that a healthy economy will be a key artery in a healthy global economy.

o India gets a 10th of the FDI that flows to China. Further improving the investment climate can only open the tap wider.

o Increasingly, India’s growing economy will be one of the world economy’s important sources of demand. An EU-India FTA can help strengthen that demand.

NREG beneficiaries to have smart cards by March o This flagship programme of the government will soon

receive a technological facelift to plug some loopholes noticed in its implementation.

o The programme aims to enhance livelihood security of people in rural areas by guaranteeing 100 days of wage employment in a financial year to a rural household, whose members volunteer to do unskilled manual labour.

o Starting with 200 districts across the country in phase I in 2006-07, it was expanded to cover 130 districts in phase II in 2007-08 and from April, 2008 it is slated to cover the whole of rural India.

o When extended to the whole of the country, it is expected to require about Rs. 1,50,000 crore per annum as funding.

Something about ballooning o The DGCA is set to notify guidelines for ‘balloon aircraft’

and incorporate them in the CAR (Civil Aviation Requirements).

o A company starting ballooning is required to have a start-up capital of Rs. 25 lakh.

o A hot air balloon travels by moving with the wind. An airship on the other hand is a buoyant aircraft which is propelled through the air in a controlled manner.

o A hot air balloon varies in cost from Rs. 30 lakh to Rs. 3 crores. The ideal weather for flying these machines is winter when outside temperature is low and air-pockets are rare. While a small balloon can take off with two passengers in its bucket, a bigger balloon may fly with 25 passengers.

World’s largest SWF o The Abu Dhabi Investment Authority is the world’s largest

sovereign wealth fund with about $650 bn in its corpus. BRPSE Chairman resigns

o Mr. Prahlad K Basu has resigned. o Mr. Nitish Sengupta has taken over as the Chairman

BRPSE.

o BRPSE: Board for Reconstruction of Public Sector Enterprises.

“Open Interest” in derivatives markets o Open interest is the total number of outstanding futures

and options contracts at any point in time. In other words, these are open or yet to be settled contracts. The level of outstanding positions in the derivatives segment is one of the parameters widely tracked by the market.

o In the futures segment, open interest data need to be read along with price changes in the futures contract. A rise in open interest in a futures contract along with its price indicates bullishness, which means investors are creating long positions. Investors may benchmark the price changes in the futures contract to the underlying (the cash market).

o In the options segments, a change in open interest in put or call options enables traders calculate the put call ratio – a popular sentiment indicator of options traders world-wide, which is the number of puts divided by the number of calls.

New credit scoring model launched by CIBIL along with TransUnion

o This model will predict the likelihood of a customer becoming a defaulter in more than 91 days on one or more lines of credit.

o The scoring model factors in the payments history, outstanding debt, credit account history, recent credit inquiries and the different types of credit the borrower has availed of.

o An individual should have availed at least one loan six months ago for CIBIL to rate the borrower under this new model. The scoring will range from 300 to 900 points, where 300 is for the worst-rated individual, while the best rate would be 900 points.

o CIBIL: Credit Information Bureau of India Limited. Its Chairman is V. Santhanakrishnan. At present, CIBIL members include 77 banks, 32 NBFCs, 6 State Financial Corporations, 10 Financial Institutions and 2 Credit Card companies. There is a move to allow the RRBs also into the fold sometime soon.

India’s Uranium needs o The mines at Jaduguda have a uranium content of just

0.6% while the one that is coming up at AP is expected to yield 0.3%. But internationally commercial ores have up to 15% Uranium.

o Till now, our nuclear power plants have looked economical because of huge, bomb-related implicit subsidies. But to

produce large-scale nuclear power on commercial terms, India requires high-grade uranium ore, or enriched uranium. This is a key reason why India needs clearance from the Nuclear Suppliers Group for imports.

About wealth inequalities o Do you remember we noted something about the Gini

coefficient sometime back in our blogs? Today a very good article titled “Rise of billionaires: Threat to growth?” appeared in ET. I recommend reading it at least once.

o It argues that inequalities in wealth in not as bad as it may appear after all. Especially in the context of India. Let’s look at the arguments:

o Though the real wealth at the top has risen sufficiently to cause a significant increase in wealth inequality in the country, the consumption based Gini coefficient was approximately the same in 2004-05 as in 1983 and 1993-94.

o There is no case for leveling the billionaires of India for at least three reasons:

Replacing a billionaire by 1000 millionaires may reduce wealth inequality but it is almost sure to increase conspicuous consumption that is regarded as socially repulsive. The thousand millionaires are likely to have much greater propensity and time to spend their money on fancy cars, homes and gadgets than one billionaire.

For poverty alleviation, the ownership of wealth matters far less than how it is invested and spent. A billionaire is far more likely to invest his billion proactively and use it for philanthropy than a thousand millionaires.

The presence of a few billionaires is a powerful inspiration to other entrepreneurs.

SBI follows US diktats and refuses to honour Iranian LCs o SBI has refused to honour LCs (Letters of Credit) issued by

Iranian banks following US diktats that have to be followed by all banks operating in the US.

o The US is able to thus hurt the trade between India and Iran, as the trade is carried out in dollars and all dollar trades are ultimately settled in US. This makes it mandatory for SBI to follow the US diktats.

UNDP targets 50% emission cut by 2050 o The UNDP has asked nations in its latest report on climate

change to reduce GHG emissions by 50% over the 1990 levels.

o It has also recommended the creation of a Climate Change Mitigation Facility to mobilize between $25 to $50 bn per year to support low carbon transition in developing countries.

o Our planning commission has rejected this report outright. Planning Commission Chairman MS Ahluwalia pointed out that the recommendations of the UNDP ought to be based on per capita emission figures and not on total emission by a single country.

Economicspeak!! o I am referring to the coverage on BANCON 2007 given in

today’s ET. o Want a high funda, one sentence definition of carry trades?

Look at this: Carry trades are leveraged cross-currency positions

designed to take advantage of interest rate differentials across currencies.

o Domestic liability dollarization It is defined as the domestic bank’s foreign exchange

denominated loans as a share of GDP and is a considered risk factor because systemic sudden stops are associated with large real devaluations, increasing the chances that foreign exchange denominated loans will be defaulted.

India’s largest ever securitization deal o ICICI Bank is reported to have carried out a transaction of

securitizing Rs. 1929 crores of its used and new car loans. o Coming as it does in the backdrop of the subprime crisis; it

is certainly an eyebrow raising move on the part of the bank. You may remember that the securitization is one financial aspect that is being blamed for the emergence of the crisis.

o The problem with this is – though the credit rating agencies may rate it very well – it is very difficult to know how much of the portfolio is subprime in nature.

US housing may be facing subprime woes; but in India it is a different story

o There will be demand for over 24.3 mn new dwellings in urban India, and over half of this will come from outside top 100 cities, according to a study “Housing Skyline of India 2007-08”.

Curbs likely on CCDs with put option o CCDs: Compulsory Convertible Debentures. These are

basically in the nature of equity. o Realty companies are found to be structuring the issuance

of CCDs to foreigners in such a way that it resembles debt

issuance rather than equity issuance. At the time of issuance itself, the issuer undertakes to buy (put option for the foreign buyer) the CCDs at a later date.

o Real estate companies are barred from tapping debt through ECB route. But there is no restriction on pure equity investment. Hence the real estate companies are found to be circumventing this restriction by a clever structuring of the issuance.

o Government may come out with some measures to plug this.

Unique water conservation method o The Orange County Water District in US has come out with

the world’s largest plant devoted to purifying sewage to step up drinking water supplies.

o The finished product though will not be directly fed into the kitchen and bathroom taps. Instead it will be injected underground to form a barrier against seawater intrusion and recharge underground aquifers.

o Namibia’s capital Windhoek is reported to be the only place in the world where recycled water is put to ‘direct potable reuse’.

Administrative Reforms Commission’s VI report o The commission headed by Veerappa Moily submitted its

6th report to the Prime Minister. India’s interceptor missile to be tested in December

o This will intercept and destroy an incoming missile. It will reportedly help India into developing a full-fledged Ballistic Missile Defence shield.

What is Seigniorage? o When one of you asked me this question, at first I mistook

it for the royalty on sand. When I Googled for an answer, this is what I found on Wikipedia:

o Seigniorage, also spelled seignorage or seigneurage, is the net revenue derived from the issuing of currency. Seigniorage derived from coins arises from the difference between the face value of a coin and the cost of producing, distributing and eventually retiring it from circulation. Seigniorage is an important source of revenue for some national banks. Seigniorage derived from notes is the difference between the interest earned on the government's securities portfolio, and the costs of producing and distributing bank notes.

o Very interesting; know? This was simple in enough in language. Hence I didn’t bother to elaborate it further.

Kamlesh Sharma is Commonwealth Secretary General

o India’s High Commissioner to UK, was selected to this post by the Commonwealth.

Tea production o it is reported that we produced about 965 mn kgs of tea

and exported 219 mn kgs last year. Ever heard about Magitti?

o This is a software being made for mobile phones. This will enable your phone to be aware of your position, preference, time of day and schedule to produce a location specific help, to find out just about whatever you are looking for.

o Sounds like a dream or something out of a sci-fi movie? Well that is what would be staring at us possibly in the year 2009.

Indian highways and accidents o An average of 365 accidents happen a day on Indian

highways. o We have a network of 66,590 km of national highways.

About medical tourism potential and investments o Our government is making a total investment of about $6.5

bn to encourage the medical tourism industry in the country. This will be used for setting up affordable hospitals and budget hotels for patients’ relatives in the country.

o The size of this industry stands at Rs. 1200 to 1500 crores. Some extreme sports

o Are you a sports-loving person? If so one of the following is sure to thrill you; just to know. Imagine the kick when you actually indulge in them!!!

o Pocket bikes These are available with 2 stroke and 4 stroke

engines with capacities ranging between 47 cc to 100 cc. The power varies between 5 hp to 14 hp.

These are pint sized variants of the normal bikes; but are used for sport.

Pocket bike racing is known as Mini-moto or Mini GP racing.

o Cliff jumping Jumping from a high cliff into a water body down

below.o Zorbing

Originated in New Zealand in the early 90’s. A zorb is a translucent PVC sphere about 7 feet in

radius, inside which two persons are strapped and then rolled downhill.

o Quad bike safari

Traversing through a desert or mountains on a four-wheeled all-terrain vehicle.

o Abseiling Descending a cliff with a rope.

o Tobogganing or sledging Sliding down snowy hillsides on a toboggan, a flat

wooden sledge curried up at the front end.o Kite surfing

A large power kite propels a rider through the water on a small surfboard.

o Sand boarding Like snowboarding, but done on sand. The rider

stands on a board and cascades down a sand dune.o Potholing

Also called caving, spelunking or speleology, this is essentially exploring caves.

o Shark diving Done under expert supervision, this is a real thriller.

The diver goes into the sea inside a top open cage while the sharks take a close look.

What is Black Friday shopping? o Black Friday is the day after Thanksgiving in the United

States, where it is the beginning of the traditional Christmas shopping season.

o This is when consumers do lot of festive shopping and the stores announce big deals for consumers.

o Thanksgiving, or Thanksgiving Day, is a traditional North American holiday to give thanks for the things that one has at the conclusion of the harvest season. Thanksgiving is celebrated on the fourth Thursday of November in the United States and on the second Monday of October in Canada.

A bit about Timbuktu o Few places in the world have an air of mystery as alluring

as Timbuktu. The name of this city in the West African country of Mali is so wrapped in legend that many people think of Timbuktu as a mythical, timeless land rather than a city with a real history.

o In many cultures, Timbuktu is used in phrases to express great distance and to suggest something beyond a person's experience. Popular sayings such as "I'll knock you clear to Timbuktu" suggest that, for many people, Timbuktu has existed more as an idea of the remote and mysterious than as an actual place.

o Two British environmentalists have started an adventurous journey to this place in a lorry powered by biofuel made from renewable sources, including recycled chocolate.

Reliance Petroleum Limited o Its market cap is bigger than the market cap of all the

three public sector majors -- IOC, BPCL and HPCL – though it has no fully functioning operating asset.

o Its 580,000 barrel per day refinery is the 6th largest in the world and is being built in a special economic zone in Jamnagar.

Pakistan suspended from Commonwealth o This is the second time that it is being suspended from the

53 nation grouping. o It was suspended in 1999 when General Musharraf seized

power. It was readmitted in 2004. o Secretary General of Commonwealth: Don McKinnon.

Top 1 to hit India o This is a car race with a difference. Instead of specially

built formula one cars, this one is competed with purpose-built normal cars.

o Another such similar contest is NASCAR. Normally a NASCAR event is conducted over an oval-shaped circuit.

o Top 1 structure is currently divided into two categories – Series 1 featuring 2000 cc cars and Series 2 with its 1600 cc line up.

Diabetes causing genes o HLA-A and HLA-B are the genes that help the body to fight

infection. Their faulty versions lead the immune system to destroy insulin-producing islet cells in the pancreas.

o Type 1 diabetes, also known as juvenile diabetes, is caused by the destruction of cells in the pancreas.

Something about REITs o REIT – Real Estate Investment Trusts. o Typically they pay out at least 90% of their net income as

dividends to investors. Rentals from properties owned and managed by these vehicles form a significant portion of their revenue stream. Therefore, their business model is based on investment in income-yielding commercial property such as business parks, office buildings, shopping malls and hotels.

Indian power sector’s losses o The official T&D (Transmission & Distribution) losses are at

35%. Compare this with China and Japan! It is 3% in China and 4% in Japan.

o As the demand supply gap is presently at 13%, unless the power supply growth exceeds 14% it would be impossible to support a growth rate of 10% in GDP.

o Estimates of expanding and upgrading electricity transmission and distribution network during 2007-12 put the investment requirement in the range of Rs. 400,000 crores.

How many states in India have restructured their electricity boards?

o Reportedly 13. The overall impact is reported to be positive.

o Restructuring usually involves separating the functions of the board into transmission, distribution and generation activities by forming dedicated companies for carrying out those activities.

Impact of spectator sports on a country’s economy? o England’s failure to qualify for Euro 2008, the premier

international football tournament in Europe, is estimated to have set back the UK economy by 1 bn pounds.

o The impact will be especially felt by way of sales in pubs where those fans who could not get tickets would gather to cheer their side over drinks.

Divestment proceeds to the government o Since 1991, the government earned about Rs. 51,600

crores through divestment of its stakes in Central Public Sector Enterprises.

Tea estates and social security o Ever since the 1951 Plantations Labour Act was enacted,

the plantations have to provide for the welfare of the workers working on the plantations. The welfare included housing, medical facilities and education. This is reportedly due to the State not having developed infrastructure and delivery systems at that time in those areas. These social security measures add about Rs. 4 to 5 per kilogram of tea’s cost.

o But now the plantations are demanding and the government has also veered round to the view that the government should bear a portion of this cost.

o India produces about Rs. 6,500 crore worth of tea at factory gate level.

Why are banks not selling their NPAs (bad debt)? o Even when the defaulting companies are not coming out of

the red, bankers are betting that the real estate locked up in sick companies would fetch far more than the sale of NPAs to ARCs (Asset Reconstruction Companies).

o The other reasons supporting such decisions are: NPA levels are at record levels of less than 1% of

total advances. New rules by RBI which have set a floor price for

banks selling off a portion of the sick loan. Since this price is significantly higher than the heavy discounts offered to the ARCs in earlier deals, they are finding that the deals are no longer attractive.

Government’s decision to treat OCDs (Optionally Convertible Debentures) and preference shares as ECBs. This has put off many vulture funds which were using these instruments to buy bad loans from Indian banks. Since ECBs have a cap on interest, foreign funds no longer find such deals as attractive as before.

Pesticide free crops get a leg up in Andhra Pradesh o It is a very interesting article that appeared in today’s ET. It

is about how AP is encouraging pesticide free farming and how it is benefiting farmers in reducing their input costs tremendously. .

SAT strikes down SEBI’s disgorgement order o Remember the first ever disgorgement order given in India

by SEBI? o Now SAT (Securities Appellate Tribunal) has struck down

this order. The order was passed by SEBI in the IPO multiple demat scam.

o It said that the order passed without giving a reasonable opportunity of being heard to the affected parties. It also found some inconsistency in the order in so far as the sequence of findings was concerned.

Inflation in the future o An estimate by FAO (Food and Agriculture Order) has

predicted that food prices would be rising at a higher rate in the next 5 to 10 years than in the past, adversely impacting those economies that have recorded higher weights to the food index in the inflation basket.

o What is the composition of our inflation basket? Food items account for 57% of the CPI (Consumer Price Index) and 26.94% of the WPI (Wholesale Price Index).

More on the unfolding subprime crisis losses o From now on till the end of 2008, nearly 4.5 lakh suprime

mortgages per quarter are scheduled to undergo their first reset (that is unable to pay the mortgage amount, the borrower seeks rescheduling of the loan amount). That adds up to $300 bn or more of mortgage loans poised to sour, and a fair part probably will.

o When the crisis began, initial estimates of ultimate losses were in the region of $250 to $300 bn and these may still be right. Only it will come in installments, quarter after quarter.

How to cope with an appreciating rupee? o In a very good article Rajrishi Singhal gives out some

excellent suggestions Cosmic question over the longevity of the universe

o The universe is believed to have been created in the ‘Big Bang’ sometime back – about 13.7 bn years ago.

o Two US Astronomers are now saying that astronomers may have unwittingly hastened the end of the universe by simply looking at it!!!

o Couldn’t really make sense of what was reported about it in the Hindu today. If you care to look at it; do let me know when you understand it.

Taslima Nasrin hounded yet again o This time from Kolkata. To Jaipur.

Commonwealth Summit o It is scheduled to commence from tomorrow in Kampala,

Uganda. o It appears to be divided on the issue of suspending

Pakistan from the Commonwealth. But some countries are insisting that Pakistan should be suspended because of the imposition of emergency in that country. These countries base their argument on the fact that Zambia and Fiji were suspended when there was a reversal of democracy in those countries.

o India did not take any overt stance and is reported to have said that it is for CMAG (Commonwealth Ministerial Action Group) to take a call on the issue.

Composition of the Nobel committee o Though since 1977 members of Parliament have not been

allowed to sit on the committee, it tends to be made up of former politicians or those with looser ties to their parties. It currently consists of one member each of the five biggest parties in the Norwegian Parliament.

India’s infrastructure funding issues o During the 11th and 12th plans, the envisaged investments

are to the tune of Rs. 20.18 lakh crores and Rs. 40.55 lakh crores respectively.

o The capacity of the economy to absorb investment of this scale is dependent on:

The regulatory environment for attracting private investment

The intellectual capacity of managers – both public and private – to structure projects in a transparent and achievable way; and

A ‘fire-in-the-belly’ attitude to deliver quality products before deadlines.

o Some good initiatives taken for streamlining contract award procedures include:

Formulating model concession agreements Building viability gap funding windows; and Finalizing a panel of advisers to structure projects for

the private sector. Some good political comment from TK Arun on Nandigram

o To equate Nandigram with Gujarat is absurd. Nandigram’s violent one-upmanship is localized, it does not lead to violence or insecurity and effectively disenfranchisement outside Nandigram. The politics of identity-based hatred that led to the savage, organized attack on Muslims in Gujarat in early 2002 perpetuates a social divide across the country, in whose cracks fester toxins that can yet consume the entire body politic. Nothing of the sort applies to Nandigram, however condemnable the killings there.

o Nandigram throws the spotlight on the failure of Left politics in India, failure to construct an emancipatory project within the framework of liberal democracy and participatory growth. One segment of the Left still eulogizes the authoritarian state capitalism of China and the erstwhile Soviet Union, and are determined to swim against the current of history. At the other end of the Left spectrum the Naxalites violently shrink whatever democratic space exists in rural life, instead of building on and expanding the freedom promised by the Constitution.

Centre considering regulation of Sovereign Wealth Funds o Since these are controlled by governments, it is felt that

they would follow the agenda set by the country concerned. Management control of an Indian company slipping into hands of a fund owned by a hostile country could pose an enormous problem. There is also the issue of some of the countries promoting SWFs not enjoying market-economy status.

o Concerns about such investment entering into the country are expressed by the national security adviser.

Most Gulf bonds don’t comply with Islamic law o Known as sukuk (Islamic bonds), these are sold with a

repurchase undertaking – a promise that the borrower will

pay back their face value at maturity or in the even of default, mirroring the structure of a conventional bond.

o A promise to pay back capital violates the principle of risk – and profit-sharing on which the Islamic bonds should be based.

o Islam bans lending on interest as usury. What is allowed is risk-sharing and profit-sharing.

Branch and ATM licensing to be liberalized o Banks planning new branches and ATMs may no longer

require a mandatory approval from RBI. The government is considering a proposal to de-license bank branches and ATMs in the country.

o The move is in tune with the likely findings of the committee on financial sector reforms headed by Raghuram Rajan.

o The opening of bank branches is governed by Section 23 of the Banking Regulation Act, 1949. Banks cannot open a new place of business in India or abroad unless RBI approves it.

Romulus and Remus cave may have been discovered o These are the twin founder of the city of Rome. o Italian archaeologists believe that they found the cave

where a she-wolf suckled Romulus and Remus. Carrefour’s entry into India

o The world’s second largest retailer and Europe’s largest has made an entry into India. It is expected to choose an Indian partner early next year and plans to launch a wholly owned Indian cash-and-carry business in 2009.

Sortino Ratio o Frank Sortino developed this ratio. Many global MF (Mutual

Fund) rating agencies prefer this risk-adjusted return measure over the Sharpe ratio, because it is simple and easy. This classifies risk in terms of upside and downside risk. It arrives at a minimum acceptable return (MAR) for an investor. Whenever the fund return is less than MAR, it adds the underperformances, but does not add outperformances. This is a better measure of risk than volatility, used by Sharpe ratio. The latter tends to value consistency in the form of good or bad performances.

Mastercard and mobile banking o Mastercard plans to use the mobile phone customer base

to reach the unbanked population. According to its estimates banking penetration is under 30%. There are

more people in the country with mobile phones than with bank accounts.

o According to a recent BCG report there are about 135 mn households in India which do not have access to basic banking services and this constitutes about 65% of the total population.

What are the factors that led to India getting exposed to the global shocks in food supplies?

o India was largely immune from global price fluctuations earlier due to tight government control on supply and prices and rising production. But increased integration with global markets, through export of value-added products such as processed foods, and recourse to imports due to stagnant production (of wheat, pulses and oilseeds in particular) has exposed India to global shocks.

A bit about Vijay Kelkar’s background o He was recently appointed as the Chairman of the 13th

Finance Commission. He is not an IAS officer, but an engineer by training and a Ph.D in economics.

o He headed the task forces on direct and indirect taxes, and also the one on implementation of the Fiscal Responsibility and Budget Management Act. He is largely credited with the drafting of the Goods and Services Act that is expected to be implemented all over the country from 2010.

FDI in cable TV set to touch 74% o The government is set to allow FDI up to 74% FDI in cable

TV services and the HITS satellite-based platform to distribute television signals. This move is expected to intensify competition between telecom companies and cable operators.

NHRC equates Nandigram with Godhra o Look at a quote attributed to the NHRC Chairman, S.

Rajendra Babu: Both the incidents were a severe assault on the face

of democracy and inflicted the worst scars on the face of the nation. The state human rights commission is actively involved in taking the case to its logical end.

What should be India’s stand be at Bali climate meet? o This is a very important debate that appeared in today’s

ET. You may be aware that he UN conference on global warming is to be held in Bali, Indonesia in December. Some important points out of this excerpted below:

o The vital question that hangs like a Damocles’ sword over India’s head is whether India will be forced to accept legally binding emission targets by developed countries of the west. Such targets would be at the cost of growth of India’s GDP and at the cost of employment. There is no free lunch in reducing carbon emission and mitigating pollution.

o No wonder the United States introduced air and water pollution control laws after a 100 years of rapid industrialisation. The effective amendments to the Federal Water Pollution Control Act came as late as 1972 and Clean Air Act was given teeth in 1970. The per capita income of the US had already reached $5,000 by then.

o A glaring case of this trade-off between reducing pollution and extinguishing livelihoods of people comes from the action taken to preserve the Taj, resulting in the closure of metal foundries, glass factories and brick kilns in Agra. Each small unit was asked to shift from coal to natural gas, which meant an expenditure of Rs 30 lakh to 40 lakh per unit. Obviously, the small units closed and 100,000 workers lost their jobs.

o Greenpeace recently released a survey based report named “Hiding behind the poor” which revealed that the highest income group in India, constitution merely 1% of the population, emits 4.5 times as much CO2 as the lowest income group consisting of 38% of the population.

India’s Uranium mining scene o India recently commenced work at Tummalapalle mine and

processing mill in Cuddapah district of Andhra Pradesh. It is being set up by the state-owned Uranium Corporation of India Limited (UCIL) at a cost of Rs. 1106 crores.

o With a capacity to process 3,000 tonne of ore daily, the plant will be the third in India and the first in Andhra Pradesh. Two other mills with a total capacity of 5,090 tonnes per day operate in Jharkhand. A crippling shortage of fuel has resulted in India’s nuclear power generating stations operating at about 50% of their capacity.

o The country’s 17 nuclear power plants have a total generating capacity of 4,000 MW. India aims to increase this to 20,000 MW by 2020.

PFC mulls overseas arm to power infrastructure needs o The Power Finance Corporation is set to establish an

overseas financial company for the development of infrastructure needs of the power sector in India.

o This overseas firm will borrow foreign exchange to the tune of about $5 bn a year from RBI. The forex money would

then go into the corpus of PFC arm for providing foreign currency loans to Indian power companies for meeting their requirement of raw material machinery imports.

o Financing is expected to be a big problem for the growing power sector in coming years. The sector needs investment of about Rs. 10.30 lakh crores in the 11th Plan. A shortfall of over Rs. 4.5 lakh crores is expected. PFC’s efforts are expected to make good some of this shortfall.

Woman in news o Micheline Calmy-Rey

She is the President of Swiss Confederation, who was on a recent visit to our country.

India seems to have become the breeding ground for international chess Grandmasters!

o With the Kochi boy G.N. Gopal having officially become the 16th Grandmaster of the country, this feeling is not incorrect.

o India also added two more players to its list of International Masters. Tamilnadu’s P. Sethuraman and Aswin Jayaram received confirmation of their titles.

Did Jesus visit India? o It appears that according to the Bible, the life of Jesus

between the ages of 13 and 30 remains untouched by gospels.

o “The Aquarian Gospel” is a movie being made that portrays Jesus as a holy man and teacher inspired by a myriad of eastern religions in India. The movie takes its name from a century old book that examined Christianity’s eastern roots.

Diplomatic gaffes too can be money spinners o The Spanish King Juan Carlos recently turned to

Venezuelan leader Hugo Chavez at a public event and was reported to have said to him, a bit irritably, “Why don’t you shut up?”

o This breach of diplomatic protocol became a smash hit across Spain today. A multi-million euro business selling ringtones, mugs, T-shirts and websites has resulted from this dialogue.

More controls on FIIs o The government is thinking of restricting investments by

FIIs from countries whose market regulatory structure is not compliant with principles laid down by IOSCO. This is in line with the recommendations made by Ashok Lahiri committee.

o IOSCO is the Spain based international standard setter for securities markets regulating more than 90% of world’s securities markets. All IOSCO members have to sign an MOU, follow the principles endorsed by the body and facilitate exchange of information among the international community of securities regulators. The organization follows an objective assessment of the level of implementation of the IOSCO principles in the jurisdictions of its members.

WHO (World Health Organization) may remove India from vaccine source list

o This follows the inspection by WHO of some GMP approved units in both private and public sector companies in India. The agency was not satisfied with what it saw and has said so in its report that has been submitted to the health ministry a couple of months ago.

o GMP stands for good manufacturing practices. WHO has found problems with India’s drug regulator and some Indian pharma companies during the inspection over the implementation of the GMP.

o In India the GMP standards approval is given by the state drug regulators and the DCGI – Drug Controller General of India.

o Unlike other drugs, vaccines are mostly sourced by governments and institutions in bulk. Indian vaccine makers export around Rs. 1,500 crores every year, a large amount of which are sourced by global agencies such as WHO.

An interesting Mexican bull o This bull named El Zalamero, aged about 17 (considered

equivalent to 70 years in humans) is known for its bravery and virility. In just 6 years, it has sired more than 25 calves of the fighting breed and even in this old age, it is the stud for about 15 cows that it lives with.

o When it was just 4 years old, it debuted on the world’s largest bull ring viz., Monumental Plaza de Toros of Mexico.

An interesting issue about Indian pharma companies following best practices in India

o Recently Ranbaxy has recalled over 73 mn tablets (gabapentin) from the US market as they reportedly contained higher levels of impurities than legally permitted.

o This has raised a question as to why we don’t see such recalls in India? The sad fact is that quality standards are flouted day in and day out with impunity in our country.

The speed with which trials are conducted in the US and damages/punishment are awarded is not seen in India.

Indo US differences over WTO talks o The points of contention between the two were high levels

of trade distorting farm subsidies provided by the US and India’s relatively high tariffs on industrial products. India wants the US to commit to lower farm subsidies before it demands more market access for its farm products from developing countries. US has agreed to marginally reduce its subsidies, but could agree for more only when developing countries make more concessions.

o In the area of NAMA (Non-agricultural market access) negotiations, the US wants India to make real cuts in tariffs, instead of just lowering the bound rates. India argues that since WTO negotiations take place on the basis of bound rates (the levels beyond which members cannot increase tariffs at any point), it is unfair to demand cuts on the applied rates.

Language lessons: o What does a Requiem mean?

Japanese set to hunt the humpback whale for the first time in decades

o These whales were hunted to near extinction four decades ago. They have been off-limits since 1963 except for a small number caught under subsistence whaling programme by Greenland and the Caribbean nation of Saint Vincent and Grenadines.

o Estimates put their global population at 30,000 to 40,000. o Japan is about to break the decades old moratorium on

hunting these whales ostensibly for scientific research. Its whaling fleet is leaving for south pacific with orders to kill up to 50 of these whales.

o Japan says that whaling is a Japanese tradition since the early 1600’s.

o Since 1986 there is a moratorium on commercial whaling imposed by the IWC.

Online advertising markets o Globally the digital advertising market is worth $30 bn and

in India it is about Rs. 500 crores and is growing at 50% annually.

o Worldwide, interactive ads account for 8% of media spend. US slowdown and impact on China

o If the US economic growth slows by a percentage point, it will result in a decline of 6% for Chinese exports.

o UN estimates put the world GDP growth to be at 3.4% for 2007. This is less than the 4% recorded in 2006.

Credit rating for Indian cities o Currently there is an ongoing exercise of credit rating 63 of

the Indian cities. Four credit rating agencies viz., Crisil, Care, ICRA and Fitch are undertaking the exercise.

o The higher a city’s rating the better its bonds subscriptions. Under the JNNURM, the Centre has promised to dole out Rs. 50,000 crore (approximately 50%) of the total requirement of funds. A city with better ratings will be able to issue bonds through the PFDF.

DGCA – Director General of Civil Aviation o Mr. Kanu Gohain. o He is likely to get a six month extension in service. He will

be in service till June 30, 2008. Planning Commission proposes National Electricity Fund

o This is to generate resources for improving power distribution network in the country.

o Some proposals under consideration include: Granting priority sector lending status to power

projects in the country. Raising the income tax exemption limit for

investment in infrastructure bonds from Rs. 1 lakh to Rs. 1.5 lakh.

India’s demographics o By 2050, about 32.8% of the country’s population will be

over 50 years old. o The country needs 3 mn nurses by 2017. Annually about

80,000 students are enrolling for nursing courses. o Is it only IT that is an employment generator?

From the Open Space column of TOI o Titanium toothbrush

It was invented in Japan. They help do away with toothpaste.

One variety of this uses titanium dioxide, which causes an electrochemical reaction while brushing and this helps remove plaque.

The other variety uses titanium bristles that last for several years.

o White holes These are the opposite of black holes. They eject matter and anti-matter instead of sucking

them as done by black holes. A Schwarzschild wormhole has two ends. One end is

a black hole, sucking in matter and other end is a white hole, ejecting matter.

Currency futures soon? o Indians may soon be allowed to participate in exchange

traded currency futures. o These are instruments that allow them to take positions in

future value of the rupee. A currency futures contract is one where two parties agree to buy and sell the currency at a future date at a pre-determined price.

o This follows the recommendation made by an internal panel of the RBI on this.

o But these recommendations also could possibly spark a turf war between the RBI and SEBI. The recommendation is that the RBI should retain the regulatory aspects of the trade even though securities exchanges are the domain of SEBI.

o See what we noted about this topic earlier on 30th June and 7th June.

When is a book considered a best seller? o When it sells 3000 copies. o Heard about Chetan Bhagat’s “Five Point Someone”? It

seems to be making waves. o It sold over 50,000 copies.

Finally the government gets the go ahead for talks with the IAEA o The Left parties gave a conditional go ahead to the

government to approach the IAEA to discuss draft safeguards agreement.

India’s cryogenic engine test successful o These engines are used in launching the GSLVs. This

technology was so far confined to Russia, Europe and the US.

o Sometime earlier on 29th October,2006 to be precise, papers reported this fact a little differently.

Forex reserves at $270 bn mark o At the current level the reserves are close to a third of the

size of the country’s economy. SBI’s Janata depositors issue

o The scheme was launched way back in 1971 to inculcate the habit of savings, especially among middle and low income groups.

o This began running losses due to the hefty commission paid to the deposit collectors (3.5%) and also due to the heavy expenses attributable to the scheme. Hence SBI decided to discontinue the scheme.

o The deposit holders have approached the Supreme Court against the discontinuance.

How many varieties of CPI (Consumer Price Index) are there? o Four:

UNME: Urban Non Manual Employees IW: Industrial Workers AL: Agricultural Labour RL: Rural Labour

Strike by WGA – Writers Guild of America o The 12000 members of the WGA are on a war path. They

are demanding that the residual payments for re-use movies and shows on DVDs and newer channels like Internet and mobiles be hiked from 5 cents to 8 cents.

o The Association of Motion Picture and Television Producers is not willing for it.

A look at the write-downs by global companies in the aftermath of the subprime crisis

o A write down (reducing the recorded value of an asset in an account) represents the decline in the value of assets related to the house mortgages held as assets by these firms:

Citigroup: $8 to $11 bn Merril Lynch: $7.9 bn Morgan Stanley: $3.7 bn UBS and HSBC: $3.4 bn each Bank of America: #3 bn

.

More on Volatility Index (VIX) o Sometimes called as “the investor gauge of fear”, it has

developed over time to become one of the highlights of the modern day financial markets.

Airport policy: Government may allow multiple airports in metros o A new policy on the Greenfield airports in the country is in

the final stages of preparation and is likely to be put in place by the first half of 2008.

o The existing guidelines require a minimum distance of 150 km between an existing airport and a new one. The distance is stipulated at 150 km in case of international projects.

India’s steel sector likely to go places o The domestic steel sector is on a roll. From being the 5th

largest steel producer, the country is all set to become the second largest producer globally by 2015-16. This would be a major leap for the sector.

o During the year 2006, it is the 5th largest producer of crude steel.

o At present while India is producing about 56 mn tonnes, the global pecking order is like this:

China – 422 mn tonnes (mt) Japan – 116 mt US – 98.6 mt Russia

OECD Secretary General o Angel Gurria

OPEC Secretary General o Abdalla Salem el-Badri

Pakistan names interim prime minister o Mohammedmian Soomro, the Chairman of the Pakistan

Senate is named as the interim prime minister. India’s first teraflop super computer

o PARAM Padma. Made in 2003 by CDAC US slowdown’s global impact

o One consequence of a US slowdown would be a falling dollar. Because of the falling dollar, it is quite likely that the European exports will be priced out of important markets, including the US and China.

o It is also likely that many countries will stop financing the US current account and budgetary deficits. This structural readjustment will be painful.

o A weaker dollar makes US exports more competitive and makes the Chinese exports to US more expensive.

India to retain BPO edge o Though there is fair bit of hype around China and other

cheaper destinations taking over India in the BPO game, many industry leaders disagree. India is expected to retain its advantage in terms of cost, scalability, English speaking population and domain expertise. Though the rising rupee is expected to make a dent in their profitability, grapevine has it that even at Rs. 30 a dollar, our BPO segment will continue to make money.

Indians going places!! o Indian American, Shantanu Narayen is now the President

and CEO of Adobe Systems. This company is known for its Acrobat Reader software.

On revenue neutral rate (RNR) for GST o It is a very good article that appeared in today’s ET.

Recommend reading it once. This would give you a peep into how experts work their way through to making recommendations. Some points worth our noting:

o The Kelkar task force report suggested that the GST rate would need to be levied at 20% -- 12% to Centre and 8% to States.

o While this suggested rate falls below the present statutory rate of 28.5% (Cenvat of 16%, and VAT of 12.5%), it is expected to raise the hackles of the consumers.

o The total excise/service tax/ VAT/sales tax revenues of the Centre and the states in 2005-06 were Rs. 134000 crore and Rs. 139000 crore respectively.

o Assuming that approximately 40% of the central excise revenues and 20% of the state VAT/sales tax revenues are from motor fuels, the balance of the revenues from other goods and services that need to be replaced by the GST are Rs. 89000 crore for the Centre and Rs. 111000 crore for the states, making up a total of Rs. 200000 crore.

o In 2005-06, the total private consumer expenditure on all goods and services was Rs 2,072 thousand crore at current market prices. Making adjustments for sales and excise taxes included in these values and for the private consumption expenditure on motor fuels, the total tax base (at pre-tax prices) for all other goods and services is Rs. 1,763 thousand crore.

o These values yield a revenue-neutral GST rate of approximately 11% (200 as per cent of 1,763 is 11.3%). The RNR for the Centre is 5% and for the states 6.3%. Allowing for some leakages, the combined RNR could be in the range of 12%.

The slowing IIP figures do not point to a trend o With the government’s indirect tax collections growing

18.6% in October, the belief that the slowdown noticed in September IIP figures is only blip and not a trend.

M. Rammohan Rao committee of SEBI o Constituted by SEBI, this committee on derivatives

recommended introduction of mini contracts on equity indices, options with longer life/tenure, volatility index and futures and option contracts, options of futures, bond indices and F&O contracts, exchange traded currency (forex) F&O and exchange traded products to cater to different investment categories.

India’s seafood exports market o It is a Rs. 8,300 crore market. o India is a leading exporter of Black Tiger shrimp to the US.

But this market is threatened by the cheap Vannamei shrimp from other Asian countries.

15th International Children’s Film Festival

o Started off in Hyderabad. About 115 films from 30 countries will be screened.

13th Finance Commission o Constituted by the President under Article 280(1) of the

Constitution, with Mr. Vijay Kelkar, former Finance Secretary as the Chairman. Other members are:

Indira Rajaraman, Professor, NIPFP Abusaleh Shariff, Chief Economist, NCAER Atul Sharma, former Vice Chancellor of Rajiv Gandhi

University BK Chaturvedi, Planning Commission Member as part

time member Sumit Bose as Secretary of the Commission.

o It will make recommendations for the period 2010 to 2015. It is expected to submit its report by October 31, 2009.

o It will look into: Principles governing grants-in-aid of the revenues of

States out of the Consolidate Fund of India Measures needed to augment the Consolidated Fund

of a State to supplement resources of panchayats and municipalities

Review of the finances of the Union and States and recommending steps for maintaining a stable and sustainable fiscal environment consistent with equitable growth

Review of the existing arrangements for financing disaster management

The need for improving the quality of public expenditure to obtain better outputs and outcomes

Bunchy top disease in banana plants o It is caused by a virus that spreads by the banana aphid. o Infected plants are dwarfed in nature and their emerging

leaves are small and narrow with yellow edges. The leaves grow upright and have a stunted, bunched appearance.

Is our economy slowing down? o The IIP for September grew at a snail’s pace of 6.4%; its

slowest in 11 months as rising interest rates pinched consumer demand and exports wilted under the weight of a strengthening rupee.

Number portability from next year? o The government has decided to introduce number

portability for cell phone users from the next year onwards. To start with this facility will be introduced in the four metros.

Excide duty on petrol and diesel may be reduced

o With a view to offset flaring oil effect on consumers and companies, the government is toying with the idea of reducing or bringing to zero the excise duty on petroleum goods.

o At present the excise duty of petrol and diesel has two components – an ad-valorem duty of 6% and a specific duty of Rs. 13 for petrol and Rs. 3.25 for diesel.

o The government seems to be toying with the idea of doing away with the ad-valorem component altogether and retaining the specific duty, albeit at a lower rate than existing at present.

o The Centre’s total revenue earning in 2006-07 on petroleum is about Rs. 93,800 crore. Of this over 55% is from excise duty.

India-Russia sign four major agreements o India and Russia seemed to convey that their friendship is

far stronger than what is made out to be in the recent press reports. Both the countries have signed a total of 4 agreements including the vexed issue of utilization of the rupee debt fund totaling to a whopping Rs. 80 bn (8,000 crore) for Russian investments and trade.

Unified Communication software o Microsoft is coming out with this software. This enables

communication and collaboration through emails, phone calls, instant messaging and video conference seamless and efficient.

India-ASEAN FTA not likely to take off o The hopes that this agreement could be ready for signing

during the ensuing East Asia Summit at Singapore are receding by the day. It is the ASEAN’s insistence on reducing the import duties on four products – palm oil, pepper, coffee and tea – to 30% on palm oil and 20% on the remaining three items, by India that is coming in the way. India has agreed to bring it down to 50% from the present levels.

o East Asian Summit comprises of ASEAN+3 and India, Australia and New Zealand.

Spectrum allocation and GoMs o The issue of spectrum allocation is generating lot of heat

between industry circles and government on the one hand and between industry circles themselves on the other.

o The law ministry suggested that a GoM be constituted to go into the whole gamut of issues that need to be sorted out. But the DoT is unwilling as it feels that this allocation is nothing but a simple procedural issue.

o The case in favour of a GoM stems from the fact that earlier too there were two GoMs that have gone into telecom issues:

A GoM headed by Yashwant Sinha looked into the New Telecom Policy of 1999.

A second one headed by Jaswant Singh looked into the issue of allowing telecom players to offer mobile services without participating in the mobile entry process. This arose when Tata and Reliance wanted to make, what was perceived as a back-door entry to offer full mobility to their landline users.

Secured credit cards o These are cards which are backed by a deposit account in

a bank. Usually the card holder is not credit-worthy or has no credit history. Hence the credit card issuers issue this type of card which has his deposit account as a security for the funds being used by the card holder. The deposit serves as a collateral.

Some interesting facts and figures about heavy power plants o A generation set of unit size 600 MW would weigh 1,500

tonnes while an 800 MW unit weighs about 2000 tonnes. Units of 500 MW size weigh less than 1000 tonnes. The dimension of the units also is larger by anywhere between 25 to 50%.

o These weights and sizes can pose a problem in transporting this equipment to the place where it is to be erected. Hence the government is planning to introduce new norms that will make ministry of surface transport’s clearance mandatory before starting construction of large sized thermal power projects.

o Though this can be perceived as one more bottle-neck, the ministry argues that the aim is to take appropriate advance action for augmenting the road infrastructure to facilitate transportation of heavy equipment.

82 Coastal police stations to set up o These are being set up with a view to curb piracy and

cross-border terrorism. They will undertake surveillance along the coastal belts of the country.

A very good essay on Academic Freedom New Director General for CSIR

o Samir K. Brahmachari Tennis

o Fernando Gonzalez making waves!! He beat Roger Federer in Shanghai Masters Cup final.

Prime Minister Manmohan Singh heads for Russia

o Perhaps this is one Prime Ministerial visit that is attracting lot of negative press about there being a chill in the relations between India and Russia.

o Russian insistence on our PM meeting his ‘counterpart’ (PM) Viktor Zubkov is not helping to set matters at rest either. They dropped hints that if our PM doesn’t meet his counterpart there, the visit would then be classified as ‘working’ and not an ‘official’ visit.

Pakistan’s suspension from Commonwealth o Following the imposition of emergency in the country,

Pakistan faces the prospect of being suspended from Commonwealth again.

o Earlier it was suspended in 1999 soon after General Musharraf overthrew prime minister Nawaz Sharif in a bloodless coup. At the insistence of Britain, Pakistan was allowed back into Commonwealth in 2004 on the promise that Gen. Musharraf would shed his uniform.

o Let’s wait and watch what will happen this time round. Notable reforms in education

o The Government is coming out with a scheme called the “Credit Transfer Scheme.” Under this students pursuing graduation and post-graduation from one university can now continue their education in another university without a break. Marks obtained by the student while studying in one university will be transferred to another university if the shift is made. The programme is aimed at bringing about convergence between conventional and distance modes of education and help attract more students to higher education.

China confirms toxic substance in toys o Chinese made toys were found to be coated with the

industrial chemical 1.4-butanediol. This chemical when ingested metabolises into the ‘date-rape’ drug, gamma hydroxyl butyrate (aka GHB), which can cause breathing problems, loss of consciousness, seizures, drowsiness, coma and death.

Plan panel for ‘open skies’ with more nations o So far, India’s open skies policy is confined to cargo

operations. o An open skies policy means foreign airlines from various

countries would get to launch unlimited services to Indian cities, provided the countries concerned agree to reciprocal rights for designated Indian carriers.

o As of now, India has open skies policy for passenger traffic with the US and UK.

Oil companies want to promote rickshaws?

o Fuel retailers are planning to adopt cycle rickshaws under Mission Indivelop – an initiative based on Prof. CK Prahlad’s development model of “The Fortune at the Bottom of the Pyramid.”

o Public sector oil companies are losing about Rs. 240 crore everyday because of under recoveries.

o While APM for fuel retailing has been dismantled, the government still regulates pricing of petroleum products sold by the PSUs. Private retailers like Reliance and Essar are free to charge market price from customers.

Governor’s gaffe on Nandigram o The violence in Nandigram has not been seeing any decline

in spite of the February 2007 government decision not to establish the chemical hub. The campaign spearheaded by BUMC (Bhumi Ucched Pratirodh Committee) has brought administration and development work to a halt, and has sought to cut off the area from government and state power.

o The Governor’s public airing of views has invited opprobrium from the press. Look at this extract from today’s Hindu editorial on the subject:

o The classic 1867 exposition of the role of the British monarch by Walter Bagehot applies equally to the office of the President and the Governor: “To state the matter shortly, the Sovereign has, under a constitutional monarchy such as ours, three rights — the right to be consulted, the right to encourage, the right to warn. And a king of great sense and sagacity would want no others. He would find that his having no others would enable him to use these with singular effect.” The right to advise and the right to warn are to be exercised in private and in confidence, and not through public statements. This restraint required of the head of state is not a mere constitutional formality but is based on sound democratic principles. In the first place, the head of state must not, through statements critical of its functioning, place himself or herself in conflict with the representative government, which has a greater democratic legitimacy. Secondly, the head of state should appear non-partisan and remain above the fray when controversial and divisive questions are being debated in the political sphere, and avoid any public statements that could give comfort to one side or the other. The Governor’s public statements on Nandigram both challenged the wisdom of the government’s approach and came down on the side of the critics of its action. Further, Mr. Gandhi laid himself open to the charge of

remaining silent when the supporters of the Left Front were at the receiving end. His conduct through this crisis has been constitutionally indefensible.

Companies are looking at virtualization to cut IT costs and cope with increasing workloads

o Increasing workloads are a phenomenon witnessed typically by web sites like www.cricinfo.com which see tremendous increase in traffic on specific days – say when a cricket match is going on. But such traffic is transient and will not be there in the following days. It doesn’t make sense to invest in a permanent increase in IT infrastructure to meet such transient jumps in traffic. So what do they do? Go virtual.

o But what is virtualization? It refers to the techniques that help extract the most out of the computing resources. It does this by making a single physical resource like a server, an operating system appear to function as multiple logical resources.

Highest polling stations in India o Ladakh (J&K) is the country’s highest polling station (17000

ft above sea level). It is followed by Hikkem in the Spiti valley of Himachal Pradesh at about 15,000 feet from the sea level.

Mr. Noriaki Kano o He is a Professor Emeritus at the Tokyo University of

Science. He is the 1997 recipient of the Individual Deming prize.

o He is best known for the product development model he developed in the 1980’s, popularly known as the Kano Model. It classifies customer preferences into five categories and offers insights into the product attributes perceived to be important to customers.

Private airlines not happy with the proposed ground handling policy

o The proposed policy allows only three agencies in ground handling at the airports – the airport operator, subsidiary companies of Air India, Indian or their joint ventures, and any other ground handling service provider selected through competitive bidding on a revenue sharing basis. This will be effective January 1, 2009.

o Ground handling work includes two basic activities – passenger handling at the land side and ramp, including loading and unloading of aircraft and aircraft handling.

o The airlines want to handle all the activities involving customer interface to be within their hands instead of hiving to off to third parties.

About Polo o India is considered the cradle of modern Polo. Babar the

Mughal emperor of the 15th century has established the sport’s popularity.

o But the sport saw a decline following the death of Sawai Man Singh, the Maharaja of Jaipur who died while playing in England in 1970. By the mid-eighties it has seen its nadir.

o The turning point came in 1987 with the arrival on the scene of Arvind Singh Mewar of Udaipur, who promoted it.

o A thoroughbred horse costs about Rs. 4 lakhs to own and another Rs. 2 lakhs per annum to maintain. Each player needs to maintain about 6 or more horses!!

Bungee jumping o This sport originated in New Zealand and was made

commercially successful by A.J. Hackett. His was the original bungee jump from Greenhithe, Auckland.

o The first modern bungee jump was made on April 1, 1979 from the 250 ft Clifton Suspension Bridge in Bristol by four members of the Dangerous Sports Club. The jumpers were arrested shortly after. But by 1982 they were jumping from cranes and hot air balloons and putting on commercial displays.

Leonardo da Vinci’s Last Supper o This famous painting was painted from 1494 to 1498 in

Milan’s Church of Santa Maria delle Grazie. It depicts a key moment in the Gospel narrative: Jesus’ last meal with the 12 Apostles before his arrest and crucifixion, and the shock of Christ’s followers as they learn that one of them is about to betray him.

World Bank to replicate Bhutan’s GNH model o Bhutan’s unique concept of Gross National Happiness to

measure a country’s wealth is now being adopted by World Bank as opposed to the measure of GDP alone.

o The policy of GNH was decreed by King Jigme Singye Wangchuck to try and reflect the true quality of life in a more holistic manner.

Norman Mailer, the two-time Pulitzer winner dies at 84 o Hailed as the macho prince of American letters and author

of such books as “The Naked and the Dead”, he was credited for insight, passion and originality.

Difference between a tortoise and a turtle? o Tortoise’s body is enclosed in a hard shell. Turtles are fresh

water or marine reptiles whose body is protected by a

shell. When in danger, a tortoise withdraws its head and limbs into the shell. Turtles cannot retract their head into their shells. Tortoises are herbivores and do not have teeth. Turtles are omnivorous. Tortoises lay eggs in warm earth and are not incubated by the mother. Turtles lay eggs often on beaches where they are born. Turtles are excellent swimmers, having legs that resemble oar-like flippers. Tortoises do not swim.

2nd Asian Ministerial meet on Disaster Risk Reduction o Held in Delhi, it has adopted 26 action points. o The declaration called for taking action along the Hyogo

framework. o The biennial conference which started in Beijing in 2005 is

to be expanded into a regional platform for disaster risk reduction.

o The conference will be held once in two years by rotation in different Asian countries to review the action taken by the national governments and other stakeholders for implementing the Hyogo framework.

o The next conference will be held in Kuala Lumpur.

What is Dhanteras? o It is a Hindu festival falling on the 13th day of the month of

Ashwin. Also known as Dhantrayodashi, it takes place two days before Diwali, in honour of Dhanvantari, the physician of gods and an incarnation of Vishnu.

o On this day women purchase gold or silver or at least one or two new utensils.

More on UAE immigrants’ problem o UAE announced an amnesty and regularization scheme to

address the problem of unacceptably high number of expatriate workers staying on in violation of its residency laws.

o By November 3, when the amnesty ended, some 95,000 illegal residents including 40,000 Indians had secured regularization, many of them getting reabsorbed in the workforce.

o The genesis of the problem lies in employees moving away from their contracts in a bid to beat a bad deal. Unscrupulous agents, unkept promises on wages further compounded the problem.

o The government’s long pending move to give more teeth to the Emigration Act, 1983 should be pursued to ensure that our workers are not shortchanged by unscrupulous agents and foreign employers.

The ill-effects of bio fuel promotion

o While we have been noting from time to time the benefits of bio-fuel programmes, an article in Hindu argues that the bio-fuel hunger of the North (meaning developed countries) is fuelling the South’s (meaning poor and developing countries) starvation.

o FAO estimates that the world is facing the lowest ever food reserves in 25 years this year. About 850 mn people are going hungry because they could not afford to buy food. Taking land out of food production exacerbates the effects of bad harvests and rising demand for food.

o It argues that the bio-fuel programme ultimately will be causing more global warming than petroleum. Nitrogen fertilizers (used in raising bio-fuel crops) generate greenhouse gases – nitrous oxide that is 296 times more powerful thatn CO2. Ethanol from maize causes between 0.9 to 1.5 times as much warming as petrol and rape seed oil (the source of more than 80% of the world’s biodiesel) generates 1 to 1.7 times the impact of diesel.

RBI to seek curbs on automatic ECBs o In a bid to control the flood of forex inflows into the

country, the RBI is proposing to the government that the limit for ECBs through automatic route (i.e., without prior RBI approval) be reduced from the present $500 mn to about $20 mn.

India and financial inclusion: a BCG study o Only one out of three people have access to formal

banking. India is home to the second largest number (135 mn) of financially excluded households.

o Barely 34% of its population is availing formal banking. o Penetration of savings accounts in rural India is about 24%

compared to 56% in urban India. India’s place in trade development index

o It is an annual index measured by UNCTAD. The index is a measure of the degree of integration between trade and economic and social development. It was launched in 2005 as a benchmarking tool monitoring changes across various factors.

o India is at the 86th place in this index behind smaller countries like Botswana, Algeria, Ecuador and Sri Lanka.

Finally NSDL gets to act as the CRA for the New Pension Scheme o Successfully wading through the objections raised by SEBI,

NSDL is finally given the nod to act as the Central Recordkeeping Agency of the NPS.

An alternative to privatization of Public Sector Enterprises o The central idea of the suggestion is that government

should divest 74% shareholding to retail investors.

Whatever can’t be absorbed by them can be sold to government financial institutions. Out of the balance 26%, government may sell about 5% to the employees and give them a small percentage as sweat equity.

o When this is implemented, as government’s shareholding falls below 51%, these PSEs shall cease to be ‘state’ under Article 12 of the Constitution and their decisions will not be subject to judicial review in terms of Article 14. They will go out of the jurisdiction of the investigative agencies, parliamentary committees, vigilance and CAG, problems which have paralyzed them for long.

Helping Pakistan cope with its problems o If you need examples of lateral thinking, I would suggest

SSSA Aiyar as one who displays it. While everyone the world over seems to be obsessed with lifting the emergency imposed in Pakistan, he is suggesting that India should encourage the shift in mind-set that is currently going on in Pakistan. That shift is about treating jehadis as liabilities, not assets. India can help in the following ways:

It needs to talk to Pakistan on partial demilitarization on the western border so that it will be able to redeploy in full strength in NWFP without having to worry about weakness on the Indian front. This will constitute Indian cooperation in helping it overcome its internal jehadi problem and can be an important building block of a future anti-jehadi common program.

It needs to show flexibility and eagerness in resolving Kashmir issue. Perhaps the LOC can be treated as an international border and an autonomous Kashmir region formed.

India should not gloat over Pakistan’s miseries. o A destabilized, nuclear Pakistan with lot of jehadis roaming

around the country is not in the interest of India. Pakistan failed to recognize this when it encouraged Taliban and jehadis. India should learn from its mistakes.

Researchers find hunger switch o Australian doctors said they had found a molecule that

suppresses appetite. They found out that MIC-1 protein targets the receptors in brain that switch appetite on or off.

Communist China’s company is the world’s most valuable company!!

o What a contrast? Petrochina beat Exxon Mobil in valuations and became the world’s first company worth more than $1 trillion.

o This follows Petrochina’s shares tripling in value on the very first day of their trading in Shanghai following an IPO that raised 66.8 bn yuan.

China, US to set up military hotline o Amid US apprehensions on China’s military modernization,

the two countries agreed to establish a defence hotline and deepen military-to- military dialogue, including on nuclear policy strategy and doctrine.

o This is the first hotline ever established by China with any country.

Railways to go high-tech with control charting system o Estimated to cost Rs. 86 crores, this IT enabled system

monitors and controls the movement of all trains across the country. Till now the system for announcement and departure of trains was disjointed as the data had to be fed manually, causing a considerable time gap.

KS Sastry Committee o It has recommended that the insurance regulator should

mandate licensed health insurers to provide all senior citizens access to health insurance, implying universal coverage.

o IRDA, acting on this recommendation has mandated accordingly. Therefore people of 65 years and below – and those above 65 years at the discretion of the insurer – should now be allowed by insurers into health insurance system. The only exception is terminally ill cases.

Food shortage alarm o Since the mid-1990’s there is a stagnation in global

agricultural production. o India’s agrarian order is primarily subsistence based,

where the average farm size is 4 acres. o While efforts at land consolidation should be pressed on in

the longer term, what needs to be done in the medium to short term is to figure out ways by which small farms can increase their productivity. Simple and low-cost technological innovations such as gravity-fed drip irrigation kits, and human-operated treadle pumps can reportedly increase the earnings of quarter-acre farms by as much as Rs. 22,000 a year.

ICICI Bank fined Rs. 50 lakh for employing goons as recovery agents

o The Delhi Consumer Commission has fined the bank and deplored the practice of intimidation resorted to by banks for affecting recoveries of loans.

o It said that there was a civil legal remedy for recovering loans. Employing goons for this was beyond the parameter of the law.

Why is there no panic in the context of crude prices touching the $100 mark per barrel?

o One expert’s view is that unlike in the 1970’s when there was a supply crisis, this time it is not the supply crisis that is taking crude prices higher. It is more a reflection of strong economic cycle (demand). Hence this is not likely to be seen as an ‘oil shock’ as was the case in 1970’s.

Citigroup announces Robert E Rubin as its next Chairman o Following the resignation of Charles Prince, the bank

announced that Robert Rubin, the former US Treasury Secretary will be chairing the beleaguered bank.

Are the days of advertising coming to an end? o In the context of the companies finding new ways to

connect directly to customers, some are asking the question “Who needs advertising?”

Media experts are suggesting that the explosion of online interactive media such as blogs and social networking sites are taking the companies ever closer to the customer. This phenomenon is bound to negatively impact the advertising industry.

o Worldwide ad spend is reportedly about $448 bn per annum.

o Online ad spends are growing at about 19% per annum globally.

RIL-RNRL dispute revisited o According to the family dispute settlement, RIL (Mukesh

Ambani group) has to supply 28 MMSCMD (40 MMSCMD if the NTPC contract does not materialize) of gas from the KG Basin discovery to RNRL (Anil Ambani group) at $2.34 per mmBtu for 17 years. RNRL also had the right to over 40% of future gas reserves of RIL at market prices.

o With soaring gas prices and the government fixing a price of $4.2 per mmBtu, RIL may be unwilling to sell it at the concessional rate.

o RNRL has gone to court contesting that RIL was not implementing the demerger scheme between the two groups approved by the court. The demerger scheme was based on the family settlement between the two brothers in June 2005.

o Now with the court directing both the groups to thrash out the deal within a time frame of 4 months, both the groups are about to sit for discussions.

India’s migrant workers in demand back home o Many of our workers working abroad – especially in Gulf

countries are likely to be employed back home by big realtors like DLF in view of the looming labour shortage.

o Our companies are on a hiring spree of foreign workers to meet the skills shortage. A case in point is the employment of workers from China for laying a gas pipeline by Reliance Industries Limited.

o As companies are finding that obtaining visas for them is proving to be difficult, they are now setting sights on our own workers working abroad in Gulf countries.

o DLF, the country’s biggest realtor is planning to bring about 20,000 workers from Gulf countries at competitive salaries.

o Manpower makes up less than 7% of building cost of residential projects. It is much lower for commercial projects.

Route dispersal guidelines to pack more ‘must’ sectors for airlines

o Government is planning to usher in new guidelines that would double the mandatory capacity deployment on category-IIA routes to 2%. Existing guidelines require all scheduled carriers to deploy 10% of the total capacity on trunk routes (category-I routes) on category-II sectors such as Guwahati and Srinagar. Besides, 1% of the capacity deployed on category-I routes has to be deployed on category-IIA routes such as Lakshadweep and Andamans.

Codex standards o These are laid down by the Codex Alimentarius

Commission, which was created in 1963 by FAO (Food and Agricultural Organization) and WHO (World Health Organization). The purpose of this programme includes protecting the health of consumers, ensuring fair trade practices in the food trade, and promoting coordination of all food standards work undertaken by international governmental and non-governmental organizations.

o Recently the Commission has emphasized that there is an urgent need to follow Codex standards with regard to infant foods.

Banks’ investment accounting in for changes o The RBI has appointed a committee to examine the

differences between its norms and the ICAI’s norms on financial instruments, called the AS 30-31, which allows

investments to be valued at the fair market value as against the existing practice of reporting the historical cost of acquisition. This is based on the international financial reporting standards (IFRS39).

Rising crude prices and criticism on oil subsidies o Estimates suggest that under-recoveries in domestic sale

of oil products could add up to Rs. 70,000 crores in the current year.

o Government’s refusal to increase the cost of fuel products is resulting in fiscal imbalances. Latest figures suggest that the government has breached the half-yearly targets on both the revenue and fiscal deficit. The revenue deficit has risen to over Rs. 61,000 crores or 85.5% of the budget estimates in the first six months of the fiscal. The fiscal deficit stood at 53.8% in the same period adding up to more than Rs. 81,000 crores.

o Some excellent editorial comments on why politically mandated oil prices are regressive:

Such a price regime provides a perverse incentive to recklessly boost consumption subsidies. It implies stubborn disinclination to levy proper user charges and account for international scarcity value.

And it means persistent lack of transparency in the oil economy, high taxes and much scope for cost-plus pricing. To insist on the extant, subsidy-heavy policy — targeted essentially at the non-poor — and voice apprehension over high poverty ratios and increasing income inequality is patently disingenuous. It needs to be junked.

Infrastructure deficit in India o In a very good article written in today’s ET, World Bank’s

Vice President for South Asia Region Mr. Praful Patel makes some forceful arguments. A discussion about the amount of resources needed (Planning Commission estimates that close to $500 bn is needed for financing infrastructure needs of the country during the ensuing plan) to close the infrastructure deficit detracts from the real problem with India’s infrastructure, which is the under-pricing of utilities. Unless this problem is addressed, even $500 bn may not be enough.

o An example illustrates the under-pricing issue. Three Indian cities have 8 hours a day of water, but their supply of water ranges from 106 litres per capita per day to 341 litres per capita per day. Compare this with that of Paris where there is 24 hour supply with 150 litres per capital daily, which is close to the median of Indian cities. So while

the per capita supply is the same, Paris supplies 24 hours while Indian cities see an 8 hour supply.

o The subsidized rates of supply of infrastructure services leads to:

Neglect of maintenance of the network when subsidies are not received;

Favouritism shown to vote banks and contratctors; and

Overstaffing in utilities. Stephen Roach on US recession and its likely impact on Asian

economies o He is the Chairman of Morgan Stanley Asia. o US consumers have been asset dependent over the last 5-

6 years, leveraging ever-rising housing values and extracting equity from those assets to fund current consumption. This has taken the US consumption to a record 72% of the GDP. In the wake of the subprime crisis, such high levels cannot be sustained the result is a definite downward trend in the US consumption. This is what is going to push US into recession.

o Impact on Asian economies: The idea that Asian economies have decoupled from the US and that whatever happens in the US doesn’t matter for Asia, is wrong and will be tested. So far the US slow down has not had an impact on Asia largely because it has been concentrated in home-building activity, which is not a global sector. But as the weakness there moves from home-building to consumption, then we will have a more legitimate test of the decoupling notion. The export led Asian economies will be certainly hit by the slowing US consumption. India is far less exposed to that given its relatively lower linkages with US and market demand.

Latest sequel to “Gone with the wind” o It is a classic novel from Margaret Mitchell. o “Rhett Butler’s People” by Donald McCaig is both a prequel

and a sequel. o In 1991 Alexandra Ripley published the first sequel called

“Scarlett” which was excoriated by critics, but sold 6 mn copies and was turned into television mini-series.

Ramakrishna Math chief passes away o Swami Gahanananda, the 14th President of the Math and

Mission passed away due to ageing related complications. He was 91.

o The Mission will announce the next chief after a month. Tennis

o Paris masters won by David Nalbandian by beating Rafael Nadal.

Cricket o India wins the Guwahati ODI against the visiting Pakistani team.

Emergency in Pakistan o President Parvez Musharraf has declared emergency in

Pakistan citing a rapid deterioration in the security situation amid growing uncertainty over his position in the face of legal challenge to his re-election in uniform.

Subprime’s second casualty o The turmoil in the subprime mortgages and credit markets

has claimed its second casualty. Charles Prince, the Chairman and CEO of the Citigroup is reported to be planning to resign at a board meeting in the face of fresh losses from distressed mortgage assets leading to a $5 bn write-down and sharp drop in profits.

o You might remember that the CEO of Merril Lynch, Stan O’Neil was the first to lose his job in the wake of the subprime crisis.

Why Jodhpur is called the “Blue City”? o Most of the houses that can be seen from the top of the

fort have a blue tinge to them and that’s why it is called the Blue City.

o It is home to the famous Mehrangarh fort and the Umaid Bhawan Palace.

Duty-free industry’s problems being taken up by government with ICAO now?

o The government is likely to take up the issue of the EU ban on LAGs from India with the International Civil Aviation Organization.

o EU has banned the carriage of Liquid, Aerosols and Gels (LAGs) from India as it has not yet signed a security agreement with the union. The move is an attempt to curb any nefarious plans on-board the flights.

o This move has adversely affected the Rs. 300 crore Indian duty-free industry. Currently around 50% of the sales at duty free shops in India fall under the LAG category.

Subsidy to boost orthodox tea plantation o The government has cleared a subsidy programme of Rs. 3

for every kg of orthodox tea produced. If the tea maker produces any extra orthodox tea from his current production level, he will get an additional Rs. 2 per kg as subsidy. The scheme will be operational during the 11th Plan from 2007 to 2012.

o India produces 80 mn kg of orthodox tea. The total production of tea is expected to be about 950 mn kgs in the current year.

o Orthodox tea is consumed by European Union markets – especially Germany, the Middle East and the CIS bloc.

India is the favourite of donor agencies and banks o India has been the largest recipient of Japanese ODA

(Official Development Assistance), UK’s official grants and the largest cumulative IBRD/IDA borrower in fiscal 2007 accounting for about 15% of the Bank’s new commitments worldwide.

o From Japan we got yen loans worth Rs. 7,000 crores over the last three years at an interest rate of 1.3% for periods ranging up to 30 years.

More on Toilet statistics o 63% of households do not have access to a toilet. The

position is worse in rural areas where 80% do not have access.

o Look at what we noted about the World Toilet Summit currently going on in New Delhi.

ETFs? o “All that glitters is not gold…”. It is an excellent primer on

Exchange Traded Funds. Indonesia’s Mount Kelud volcano erupts

o Seismographic signals picked up the eruption; but no signs of ash or lava are seen.

o When it erupted in 1990 at least 30 people were killed. In 1919, about 5,000 died when it erupted.

o Incidentally Indonesia has the highest number of active volcanoes, sitting as it is on a belt of intense seismic activity known as the “Pacific Ring of Fire”.

Indian space developments – reusable launch vehicles and Chandrayaan

o ISRO plans to flight test Reusable Launch Vehicle Technology Demonstrator in December 2008. A successful reusable launch vehicle is expected to bring down the costs of access to space from around $20,000 a kg to about $200 to $500 a kg.

o Air breathing engines play a vital role in such a demonstrator. They do way with the need to carry oxygen onboard the rockets and provide far greater propulsion efficiencies.

o India plans to develop operational reusable launch vehicles by 2025.

o Chandrayaan I is slated for launch on April 9, 2008.

Onboard this mission is a 20 kg Moon Impact Probe. Once ejected from the spacecraft from the space, it will head towards the moon. Video-cameras on board the probe will take pictures of the moon’s surface. A mass spectrometer will ‘sniff’ the tenuous atmosphere above the moon to find out what it is made of.

o Charndrayaan II could take place around 2011-12. o Moon is at a distance of 3.84 lk km from earth.

Navy looks for alternatives to Dhruv o Unhappy with the indigenously developed Dhruv

helicopters, Indian Navy is looking for alternatives. It is badly in need of replacements for various helicopters – Sea Kings, Chetaks, Dhruvs and Kamov-25s.

IMSA honorary fellowship to Justice K. Narayana Kurup o The International Medical Sciences Academy has conferred

this fellowship on him. He is the second non-medical person to get this fellowship. The first one was the inventor of CT scan Dr. G.N. Hunsfield.

o Justice Narayana Kurup’s contribution to the field of medicine was from a classic judgment on banning smoking in public places. It has been hailed by the international community as a unique contribution by the Indian judiciary to protect human rights to health.

Tidbits from Open Space column of Times of India o South Africa is known as a Rainbow Nation to describe the

unity of various cultural, racial or ethnic groups in the country. This phrase was coined by Archbishop Desmond Tutu.

o The first Asian to win a Nobel for literature is Rabindranath Tagore in 1913. The second is Shmuel Yosef Agnon of Israel in 1966, when he shared the honor with Nelly Leonie Sachs, a German-Swedish poet.

o Difference between an alligator and a crocodile Crocodile has a very long, narrow, V-shaped snout,

while the alligator has a U-shaped snout. Crocodile’s upper and lower jaws are nearly the same

width. Alligator has a wider upper jaw; so when the mouth is closed the teeth in the lower jaw fit into the sockets of the upper jaw. This hides them from view.

Alligators prefer fresh water while crocodiles like brackish water.

120 combination drugs to be recalled from the market o As against the government’s demand of withdrawing 294

combination drugs the pharmaceutical industry has agreed to withdraw 120 combination drugs from the market.

o A combination drug consists of two or more molecules used to treat multiple ailments. For eg., pills which cure cold and also act as pain killers.

o The total pharmaceutical industry size in India is Rs. 30,000 crores. Compare this with the global size.

Developments on subprime fiasco o The US and European banks have reportedly suffered

about $20 bn loss so far. o While the subprime fears have not totally faded away and

the losses are still being counted, the fears of recession are not being fuelled partly because US employment scene has been rosy in the last couple of months. Payrolls climbed a steep 166,000 in October.

India and innovation o It is a well-known fact that a country’s economic progress

hinges a lot on its innovative capabilities. India’s luck on this count seems to be improving over the last couple of years with many companies doing cutting edge research in the country.

o US patent filing and approval is a long drawn process and takes anywhere between 36 and 48 months.

o The top 5 emerging markets (including India) have filed over 3,500 patents between 1999 and 2003.

o A US report says that patent applications from China, India, Singapore, South Korea and Taiwan rose 759% from 1981 to 2001, compared with a rise of 116% from the US during the same period.

Indian power sector scene and Gujarat o Gujarat has reportedly been able to effectively tackle the

power problem to deliver reliable power to all, aided by its Jyoti Gram Yojana. It is the only state in India to have provided access to each of its 17,940 villages.

o The country’s AT&C losses (a euphemism for loss of electricity largely due to theft and partly due to genuine technical transmission losses) are way ahead of the global average of 5 to 10%.

o The pace of reforms in the country also has not picked up with the fund releases for APDRP during the 10th Plan being a paltry Rs. 1575 crores against the planned Rs. 20,000 crores.

o An industry study reveals that every 1% reduction in T&D loss can save additional capacity of 800 MW.

Hypertension control o Recent research suggests that hypertension (commonly

known as Blood Pressure) is controlled by a protein complex in the kidneys.

Why did the immigrant workers in Gulf (UAE) go on strike? o It is a manifestation of the growing social inequity caused

by the frenzied expansion of the emerging economies. o The vast numbers of immigrant workers are treated

unfairly, with about half their salary impounded for providing food for them. Their average salaries are also very meager at about $163 to 272 per month compared with the $400 prescribed by the protocols signed by the Indian government with the Gulf countries. In contrast the average monthly salary in UAE is about $2,800.

Rowling’s new offering is fairy tales o The author of the wildly popular Harry Potter series has

come out with “The Tales of Beedle the Bard”. Only 7 copies of the handwritten book are reportedly made. She plans to auction one of them to raise money for children’s charity. The other 6 will be given away as gifts.

o The copy to be auctioned is expected to fetch more than $62,000.

National food security mission o It aims at increasing production of rice by 10 mn tonnes,

wheat by 8 mn tonnes and pulses by 2 mn tonnes in the next 4 years.

o It is a Rs. 4,882 crores scheme and was launched in 305 districts of 16 states.

o The strategy is to bridge yield gaps by introducing modern technologies and improved agronomic practices.

Alonso leaves McLaren o The 2005 and 2006 Formula One champion has decided to

leave McLaren following his stormy relationship with the team. He worked only for one year of his 3 year contract with the team.

World Toilet Summit asks Indian Railways to be responsible o Experts participating in the summit urged the Indian

Railways to stop trains scattering lakhs of litres of human waste across the country every day.

o The world’s largest network of railways transports 16 mn passengers on 8000 trains daily, spreading an estimated 3 lk litres of human waste from ‘open discharge’ toilets.

o The experts at the summit suggested that it should adopt the aircraft-style vacuum system to replace these old fashioned toilets in trains that contaminate soil and water. It is estimated that it would cost approximately about $1 bn to fit coaches with vacuum toilets and storage tanks.

Crude is testing $100 per barrel

o Crude oil futures on Nymex have begun trading at $125 per barrel and beyond.

o This is a strong indication that the spot prices will breach the $100 mark in the near future.

o The Indian crude basket, calculated as a mixture of Dubai/Oman and Brent is above $85 per barrel. The present fuel prices in India are frozen when the basket was at $55 per barrel.

PMC – new technology for had disk storage o It stands for Programmable Metallization Cell. o Likely to hit the markets in the next 18 months, if

successful, this will probably replace hard drives, flash memory and RAM used in PCs.

o The technology uses nanowires created from copper atoms to record binary data. It stores information by rearranging atoms to form stable and extremely small memory cells. Each cell can potentially store multiple bits of information.

Dinosaur extinction linked to volcanic eruptions in India? o Recent research suggests this possibility. Huge volcanic

eruptions in the Deccan plateau might have killed the dinosaurs about 65 mn years ago. The eruptions are believed to have released more climate altering gases into the atmosphere than the widely believed cause hitherto.

o So far, researchers believed that the Chicxulub meteor impact in the Gulf of Mexico would have killed all the dinosaurs.

India is becoming a hot destination for CDM investments o About $4.2 bn are expected in the country over the next

few years for development of technologies that reduce GHG emissions.

o Several western countries are looking for opportunities of investing in cleaner technologies in developing countries.

o Out of a total 819 projects registered by the CDM executive board, 283 are from India, the highest by any country.

ARCIL o Asset Reconstruction Company India Limited. It is company

sponsored by leading players in the Indian financial sector – SBI, ICICI Bank, IDBI and Punjab National Bank.

o It is an Asset Reconstruction Company (ARC). ARCs act as debt aggregators and engage in acquisition of NPAs. Thus ARCs take away the distraction by isolating NPAs from the banking system and act as "bad bank". This leaves rest of the banking system free to act as "good bank" and return to equity markets and normal banking business. Governments encourage transfer of assets to ARCs through creation of supportive environment. Governments may also

provide special powers to ARCs that are not otherwise available to banking system.

o Indian banking system has NPAs of over Rs. 4 lakh crores. What is ‘market risk’ for banks?

o The BIS (Bank of International Settlements) defines this as risk that the value of ‘on’ or ‘off’ balance sheet positions will be adversely affected by movements in equity and interest rate markets, currency exchange rates and commodity prices.

HHI and ‘contestable markets’ o Herfindahl Hirschman Index (HHI) is a commonly accepted

measure of market concentration. It is used to determine the extent of competition in an industry. It takes into account the relative size and distribution of the firms in a market and approaches zero when a market consists of a large number of firms of relatively equal size. It increases as the number of firms in the market decreases and/or the disparity in size between these firms increases.

o Another measure used as a benchmark of competition in markets is the contestability of markets espoused by William Boumal. A contestable market is one in which entry and exit of firms are free. It never offers more than a normal rate of profit and is characterized by the absence of any sort of inefficiency in production.

Can the states levy tax on Central government’s properties? o Article 285 of the Constitution prohibits tax on Central

government properties by any state government. o But this does not include charges for services rendered. For

eg., when water is supplied, sewerage facilities are provided etc.

What is meant by parole? o A convict in a murder case can be released on parole, if he

finishes serving three years sentence. Parole is like leave earned; but it is not a leave/remission from the sentence. For every six months of sentence served, it appears that about 15 days’ parole can be given. Parole for a month (if accumulated balance is available) can be granted by the Government on a case to case basis.

o But the prisoner will have to serve the period of parole availed in addition to the sentence period.

Pilot of Hiroshima bomber dead o Paul Tibbets died at the age of 92. o He was the pilot for the B-29 bomber (Enola Gay) that

dropped “Little Boy” nuclear bomb over Hiroshima on August 6, 1945. It killed 70,000 to 100,000 people and injured countless others.

Martina Hingis quits tennis o The five time Grand Slam champion was reported to have

tested positive for cocaine usage at Wimbledon. She denied using cocaine. The 27 year old Swiss player lost in the third round of Wimbledon this year.

o She announced retirement from competitive tennis.

Now it is time for sterilization tax o The RBI and the Finance ministry are working on imposing

a sterilization tax on the ECBs. o Another measure under consideration is the auctioning of

foreign loans’ quota to help moderate the inflow of ECBs. o Currently foreign borrowings are about $25 bn a year. o I am sure you would remember that the RBI loses about 3%

on sterilization. This 3% is the difference between what it earns by deploying the forex reserves in US treasury bills and the interest it pays in the domestic market for sucking out liquidity through the issue of government securities.

o What’s your take on this? What impact will it have on FII or FDI inflows and with what result? Think through and discuss in our shout-box.

Status of India’s nuclear power production o India’s current nuclear power generation set-up is just

about half of what the country’s domestic uranium reserves can support. At present, only 4,190 MWe of power is generated by nuclear plants, and another 1000 MWe capacity is under construction. The country reportedly has enough resources of natural uranium to support operation of 10,000 MWe of pressurized heavy water reactors (PWHR).

o It has been estimated that the existing uranium reserves in the country are approximately 78,000 tonnes, which is just sufficient to power 10,000 MWe capacity.

o India has 17 nuclear reactors, of which two are light water type and the remaining 15 are PWHRs.

o Latest uranium mining sites include: Chitrial in AP and Gogu in Karnataka.

US economy’s expected performance o It is forecast that the GDP growth will be about 1.5% for

the current quarter and will be about 1.3% in the first three months of next year.

Textile sector sops o With a view to ameliorate the worsening conditions of the

textile sector because of the appreciating rupee, the government is considering the following measures:

Restructuring of the TUFS scheme

5% interest reimbursement 10% capital subsidy

o Why is textile industry the worst hit in a rupee appreciating scenario?

Being competitive mainly on account of the labour cost arbitrage, this is highly vulnerable to exchange rate swings.

About 85% of the trade is invoiced in dollars.o The ripple effects will be felt in:

Textile machinery industry Cotton farmers

Foreign funds may be allowed in to our bond market o At present there is a cap on FII investments in the bond

market. It is pegged at $4.7 bn. Out of this $3.2 bn is for government securities and $1.5 bn is for corporate debt.

o Hope you understand what it means. It means that no foreign fund can hold more than $3.2 bn in our government debt. Sounds curious; isn’t it? While on one hand we want more money to bridge our deficits, we seem to be very choosy! A contradiction; isn’t it?

o Both the Tarapore committees have recommended scrapping of caps on FII investment in rupee-denominated debt.

EPF interest question o We all know that the government is afraid of taking a firm

stand on declaring interest EPF corpus. Most of the EPF corpus (about 65% of it to be precise, amounting to about Rs. 95,000 crores) is invested in SDS. It earns 8% interest. But the EPF board announced 8.5% rate. The Trade Union leaders demand that the interest on SDS should be enhanced to 9.5% by the government.

India’s Energy Exchange o It is likely to commence operations from November. o Short-term trading currently accounts for 3% of the total

power market in India, which is close to Rs. 1.25 lakh crore. Globally the figure is between 30 to 40%.

o This power exchange will enable a customer having demand of more than 1 MW to buy power through the exchange.

Size of India and China economies o India: $906 bn o China: $2.7 trillion

Sovereign wealth funds o These are huge pools of capital built up by a small group of

mainly oil-rich countries to invest their assets around the world.

o They control an estimated $2.5 trillion investments across the globe.

o Many developed nations are getting uncomfortable with these funds as they fear that these funds will slowly take over the corporates in those countries. But experts say that these fears are unfounded. They argue that when this money is good for the foreign governments (as a lot of it is invested in their securities to finance their deficits) why should it be bad for the corporate sector?

Research on fear o In humans the fear hot-spot is the amygdala, an almond

shaped part of the deep brain. o It is not responsible for all of people’s fear response, but it

is like the burglar alarm that connects to everything else. Asian Indoor Games at Macau

o Chatholi Hamza and Sinimole Paulose won gold in the men’s and women’s 1500 metres respectively.

Key points in RBI’s credit policy o CRR hiked by 0.5 % to 7.5 per cent from 10th November o Bank, repo, reverse repo rates unchanged o GDP growth outlook unchanged at 8.5% for 2007-08 o Inflation to be contained close to 5 per cent in FY'08 o Inflation expectation in range of 4-4.5 per cent o Medium term objective on inflation is 3 per cent o Oil companies permitted to hedge foreign exchange on

overseas OTC exchange. o Importers and exporters allowed call, put options o Authorised dealers permitted to offer American Options o Working group on RRB, core banking roadmap o Financial aid to RRBs for IT implementation o Action plan for National Electronic Clearing Service o Hi-level committee to review lead bank scheme

NDS – Negotiated Dealing System o It is the official computer screen based trading system in

government securities managed by RBI. All the banks and other allowed institutions (Primary Dealers) take part in trading through this system. These ‘members’ have an account (current account) with RBI. These members can in turn open what are called the SGL (Subsidiary General Ledger) accounts with their clients who are interested in taking part in this market.

Do you know how much it costs to purchase an Airbus A-380 plane?

o The catalogue price of this plane is about $320 mn. That is Rs. 1280 crores if we assume an exchange rate of Rs. 40 per dollar!!

What would happen if India doesn’t clear the Indo-US nuclear deal now?

o If India doesn’t take the agreement to its logical conclusion, then the deal with US will have to be started all over again. Under the American process, any legislation that doesn’t go through cannot be carried over to the next Congress.

GAP to return Indian garment shipments o GAP is a big US fashion company and is believed to have

sourced around $800 mn worth of clothes from Indian sub-continent last year.

o There were allegations that the Indian suppliers engaged child labour in one of their factories. This has led to an international uproar and the consequence is that GAP is likely to return those shipments.

Broadband penetration in India o According to the latest figures, India has just about 2.3 mn

broadband subscribers. That translates to a penetration of just 0.2% for broadband compared to 19.6% in the US, 20% in the UK and 32% in Denmark and Iceland.

o India has 39.5 mn wireline telephone subscribers compared to Denmark’s little over 3 mn.

o Despite having over 100 mn PCs (which hardly translates to about 3% PC penetration), 40 mn Internet users and 70 mn cable and satellite homes, broadband reaches only 2.3 mn users in India.

o PC penetration is 8% in China, 14% in Brazil and 15% in Russia.

NELP VII o New Exploration and Licensing Policy (NELP) VII round is

due to be announced. It appears that the government is thinking of making it mandatory for Indian companies to have some foreign joint venture partners who have experience in deep sea exploration.

o The foreign partners should be those operators producing oil and gas from deep waters beyond 400 meters bathymetry (ocean depth).

Standby mode turns an energy sucker o Latest estimates show that 5% of electricity used in the US

goes to standby power – ‘vampire electronics’, a phenomenon energy efficiency experts find terrifying as energy prices soar and the planet warms.

o About 40% of the electricity being used to power a home electronics is consumed while they are in the standby mode.

China’s interesting name o In Mandarin (the Chinese language) it is called Zhongguo. o It roughly translates to ‘Middle Kingdom’.

Brazil to host the 2014 World Cup Football? o The South American country is the only nation bidding to

host the tournament which is due to be staged on the continent under Fifa's rotation system.

Is Mukesh Ambani the richest person on earth? o Billionaire Mukesh Ambani on Monday became the richest

person in the world, surpassing American software czar Bill Gates, Mexican business tycoon Carlos Slim Helu and famous investment guru Warren Buffett, courtesy the bull run in the Indian stock market.

o His net worth rose to $63.2 billion (Rs 2,49,108 crore). o But Mukesh is disputing these calculations. He says he is

worth about $50 bn. Let’s wait and watch what Forbes or Fortune have to say in this matter.