Civil Services Guru

CSAT - Preparation Strategy

2014-04-28T16:41:00.001+05:30

This is a guide to your IAS Preparations and we are giving subjectwise details of strategy to be taken up during your prepration for the IAS Exam. We are still adding resources to this page for Civil Services preparation. Please keep a watchout for newer pages that we keep linking. Please visit our active links for the information on IAS Preparation.

Note: As you can see there are many subjects for which we have no resources on Strategy. If you can suggest any Strategy for the following subjects or know of any links where they may be available, please send them to us. Civil Service Preparation is a labour of love and if you are dedicated enough you shall surely make it. All the best for your IAS preprations!

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Current Affairs 22 January 2011

2011-01-22T21:36:00.001+05:30

22 January 2011

Politics & the Nation

Premji shows CEOs the door

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

Finance & Economy

Some interesting stats on urban infrastructure

A recent McKinsey report estimates that by monetising urban land assets, together with realistic levy of property taxes and user charges that reflect reasonable costs, India could generate up to $27 billion a year (or $58 per capita per annum). Given that our current investment in urban infrastructure is a paltry $17 per capita, pro-active policy can provide much-needed resources for trunk infrastructure for boosting housing and real estate.

Panel to rework Factories Act in a step towards labour reforms

Prime minister Manmohan Singh has set up an expert panel to rework the archaic Factories Act of 1948, giving a big push to labour reforms to ensure the safety of workers.
The committee led by Planning Commission member Narendra Jadhav has chief economic advisor Kaushik Basu as a member. The panel will submit its recommendations within the next four weeks.
The Act defines factory as any premise where 10 or more workers are working or were working on any day of the preceding 12 months and manufacturing process is being carried on with the aid of electricity.
In addition, it lays down the following criteria:

A factory that has more than 100 employees needs to take govt nod to sack any employee
An employee working for more than 9 hours a day to be paid double his normal wages as overtime
No work period can exceed 5 hours without a break of at least 30 minutes
No factory can be overcrowded to an extent injurious to the health of the workers
Every factory has to be kept clean and free from effluvia arising from any drain, privy or other nuisance & in particular accumulations of dirt
Factories with more than 30 women need to have a room for the use of children aged under 6

Reliance net rises 28% on higher GRM

Reliance Industries, India's top company by market value, reported a 28% growth in quarterly net profit as it earned more dollars for each barrel of oil it refined while strong demand boosted the petrochemicals business to its best-ever performance.
The company, which runs the world's biggest refining complex at Jamnagar, is expected to maintain robust refining margins in the current quarter as economic recovery in western countries fuels demand and expands gross refining margins (GRM). Its refinery is expected to process more crude in the current quarter as one unit was shut down for maintenance in the October-December period.
Third quarter net profit rose to Rs. 5,136 crore, the highest since 2007, while sales rose an annual 6% to 62,399 crore.
The company's GRM in October-December improved to $9 a barrel from $7.90 in the previous quarter and $5.9 a barrel reported in the quarter ended December 2009.

The copyright conundrum that is tormenting the film industry in India

It's supposed to amend the copyright laws in India but The Copyright (Amendment) Bill, 2010 (the Bill) might just also amend the way movies are made. The discordant note here is music — the creators versus the owners. Do the ones who create it, own the music or the ones who invest in it? There are no simple answers. Neither with the industry, nor with the lawmakers. For the last year, since things were brought to a flashpoint by the lyricists, no one seems to have budged an inch. Now, the government has put the ball squarely into the industry's court. They have to come together and arrive at a solution of what constitutes Intellectual Property Rights (IPRs) and how to split the commercials fairly.
Currently, music rights for big films can contribute as much as 10-15% of the film's revenue while the proposed amendment would reduce this to 5%. According to the amendment the new royalty split would read: 50%: music label; 25%: film producer and 25%: split between the lyricist and composer. This is against the current scenario where 100% goes to the music label (read T-Series, Saregama, Sony BMG, Yashraj etc).

Technology

Ever heard of cloud telephony?

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

International

Some very good ideas on how the post-Cancun framework should be

Take a look at this article by Ashok Khemka. Well worth a read.

Language Lessons

comestible: Noun

Any substance that can be used as food

Current Affairs 21 January 2011

2011-01-22T21:28:00.001+05:30

21 January 2011

Politics & the Nation

MNP is here finally

Mobile number portability is here finally. Look at how you can change your mobile operator without losing your number.

An interesting graphic on rising oil prices

Take a look at it here.

Finance & Economy

Secret overseas account holders take refuge in discretionary trust structures to escape tax authorities

As time runs out for Swiss bank and other secret offshore accounts of resident Indians, some of them are hiding behind trust structures to escape tax authorities.
At least three individuals who were ordered to pay tax against money lying in Liechtenstein's LGT Bank have told the tax department that their names figure as beneficiaries of a trust that has an account with the bank. The persons said they were neither aware how the trust was formed nor have they received any money from the trust.
Many residents who stashed money in big as well as boutique Swiss banks like Julius Baer may have parked the money in the names of discretionary trusts. In discretionary trusts, the proportion of money to be shared with the beneficiaries are left to the discretion of the trustees and not spelt out in the trust deed.
Will account holders have the last laugh?

It depends on how complex the structures are. In the case of trusts, they will take refuge as beneficiaries with no knowledge about the trusts

Is forming trust the preferred route to park money abroad?

In several cases it is. There are also those who open direct accounts with numbered codes. Till a few years ago, this was considered invincible

What are account holders doing?

Many of them are believed to be moving funds from Swiss banks to Dubai. Once the money is with a UAE bank, it can be invested in even FDI-compliant projects in India

Some views on containing price spiral in vegetables

The vegetable price sprial is largely artificial, and if the government does not take steps to reform marketing and modernise logistics for perishable farm produce, the problem won't go away, says Saumitra Chaudhuri, Member of the Planning Commission.
Some excerpts from his op-ed in today's ET are worth our attention:
The Agricultural Produce and Market Committee (APMC) Acts of the state governments have conferred a monopoly on the APMC mandi to execute trades in farm produce, including perishable horticultural products such as fruit and vegetables. The intention, no doubt, was to provide the farmer with the certainty of a marketplace and assurance of payment. However, the suspicion that the system has been hijacked by traditional middlemen has if anything been amply borne out by this recent experience with brinjal, tomatoes and cauliflower. In theory, it is supposed to be the farmer alone who can offer his/her produce at these mandis. In practice, this function is discharged by primary aggregators whose conflation with the farmer only holds true in the sartorial type-associations in the mind of the urbanite Indian. The mark-up between the mandi price and the retail price in the same city is scandalously high, testifying to the further layers of transactions and transaction costs that are involved. Between the price that the retail consumer pays and what the farmer actually receives is a big chasm. Of what utility is a regulation that ends up fleecing the customer and short-changing the farmer?
There is a tendency to conflate the issue of corporate retail chains entering the horticultural space with that of foreign investment in these chains. This has contributed to muddying the water. There is a clear imperative to take the necessary steps to have perishable farm produce deleted from the list of items covered by the APMC Act (easier than trying to amend the Act) and create a regulatory framework for the entry of retail chains into perishable farm produce with a direct interface with the farmer. Whether to permit FDI into this business is a second and separate decision, as also is in what form to this. If we do not take the necessary steps to modernise logistics for perishable farm produce, we will remain for ever hostage to the problems we have faced this winter.

No change likely in FSDC role

The government is unlikely to make changes in the mandate of the recently set up Financial Stability and Development Council, despite lingering concern among regulators that the interregulatory mechanism will encroach on their autonomy.
The FSDC will meet for the second time today to take stock of the economy.

CAG pegs tax loss of 53K cr on non-resident transactions

The government has forgone almost Rs 53,400 crore in taxes that it could have mopped up from transactions involving foreign residents over five years, an analysis by the Comptroller and Auditor General has said.
Only Rs 121 crore was collected from non-resident taxpayers, said the report of the CAG, out of a potential amount of Rs 53,503 crore.
Such payments included profits remitted by foreign institutional investors and royalty payments by Indian branch offices of foreign companies. The tax on such transfers, called tax deducted at source, or TDS, is supposed to be deducted in India before the money is sent abroad.

Language Lessons

metronome: Noun

Clicking pendulum indicates the exact tempo of a piece of music

conflate: Verb

Add together different elements

skunkworks

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

Current Affairs 20 January 2011

2011-01-22T21:25:00.001+05:30

20 January 2011

Politics & the Nation

Cabinet reshuffle

Prime Minister Manmohan Singh on Wednesday undertook cosmetic changes in the portfolios of his ministers, particularly those manning key economic and infrastructure departments, with the impending assembly elections and concerns over charges of corruption emerging as the key drivers behind the reshuffle.
The prime minister went in for only a limited expansion, and a more comprehensive cleansing exercise is expected to follow after the conclusion of the budget session of parliament.
The reshuffle-cum-expansion exercise saw the induction of three new faces, elevation of five ministers, three of them to cabinet rank, and easing the burden of ministers holding more than two portfolios.
Take a look at this updated list of the Union Cabinet.

What an observation!

"We talk of the demographic dividend but cannot see that we are courting a demographic disaster as we sacrifice the possible good for the illusive perfect."
Writing on the subject of Right to Education, Madhav Chavan, CEO and president of Pratham Education Foundation concludes his essay with the above line. A good article. Can read at least once.

Finance & Economy

Proposed audit norms being whittled down

The government is set to raise the threshold for independent verification of corporate transactions in the Companies Bill, diluting a proposal it made before a key Parliamentary panel.
The threshold would now be fixed at 1% of a company's annual turnover as against Rs. 5 lakh suggested by the corporate affairs ministry before the Parliamentary Standing committee on finance.
This means auditors would have to verify all transactions above the 1% threshold with counter parties, such as banks, to ensure their authenticity.
As of now, an audit is primarily a review of a company's financial statement to establish its truth and fairness. Auditors usually do not go into the veracity of the numbers.
The move to get the transactions independently verified is aimed at checking corporate frauds, like the one involving Satyam Computer Services (now called Mahindra Satyam).
The Bill would also give 'audit standards' a statutory recognition, meaning a violation would attract penal action. Currently, accounting standards do not have the force of law.

States refuse to lend hand to FM in fight against inflation

Finance Minister Pranab Mukherjee on Wednesday asked the state governments to cut local levies on food items to check their soaring prices, but most non-UPA states shot down the idea at the very outset.
States, where the government is not part of the United Progressive Alliance, blamed the central government for the high prices and demanded that it cut duties on petrol and diesel.

RBI opens fund taps, throws MFIs a lifeline

The Reserve Bank of India saved banks from taking a knock on their portfolio due to slumping recovery from micro lending and threw a lifeline to embattled microfinance companies after the Andhra Pradesh government imposed restrictions on their functioning.
The central bank relaxed rules on classifying a bad loan when there is a default. Restructuring of loans to the Rs. 25,000-crore microfinance industry will qualify to be classified as standard loans up to March 2011 even if they are not secured.
The central bank's move is expected to save the banks from providing large sums, rather than lift the fortunes of the sinking microfinance sector.
The central bank has said this move is temporary, as it did with relaxing the classification norms for real estate lending after the collapse of Lehman Brothers in 2008.

International

An economist's take on world growth

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

Language Lessons

kerfuffle: Noun

A commotion or fuss, esp. one caused by conflicting views

Current Affairs 19th January 2011

2011-01-20T00:35:00.001+05:30

19^th January 2011

Politics & the Nation

Compulsory off for SBI staff to sniff out frauds

SBI has reportedly told all its officers to take compulsory 'preventive vigilance leave' for at least 10 days every financial year. The decision, taken by the high-powered committee of the bank's board, was communicated to employees a week ago. It follows a string of frauds that have rattled several financial institutions in recent months.
While reviewing high-value frauds, the committee found they had been perpetrated by officers who had established a reputation for being dedicated and hardworking. These are employees who did not avail of any leave earned by them. The frauds only came to light when such employees went for training or took leave for some other reason.
There are MNC banks which go a step further. For high-risk activities like bond and foreign currency trading, these banks assign compliance officers to scan the books while the dealer is holidaying.

MGNREGA and minimum wages

What is the issue? Why is there a problem?
To know it, you must read this news report. Interesting.
Some excerpts:
Centre under pressure to link wages paid under the Mahatma Gandhi National Rural Employment Guarantee Act, of MGNREGA, to minimum wages
Under the Act, a worker is entitled to . 100 a day for minimum of 100 days in a year.
Centre concerned that states could raise the minimum wages to some unreasonably high level and enforce it just for MGNREGA
Govt recently decided to benchmark MGNREGA wages to inflation, which will push up remuneration between 17% and 30%

Finance & Economy

Why are MFIs being castigated in India and what should they do to avoid the negative press?

MIFs are being castigated in India because it is only in India that there is competition between government-sponsored and private MFIs, with the government wanting a monopoly. Second, India alone has a tradition of politically-induced default. Third, India alone has rival MFIs giving multiple loans to borrowers, leading to overborrowing and unsustainable debt.

MFIs should think beyond mere lending to avoid the negative press.

First, MFIs must spread activities among several states, and not become dominant in any one state.
Second and more important, MFIs must start organising women borrowers to stage demonstrations on their behalf when needed. Politically, that alone will take the sting out allegations that they are driving people to suicide.
Third, they need to get involved in livelihoods development, in providing veterinary services and insurance, and in lowering prices of basic goods for clients by clubbing their orders together, passing on wholesale discounts to clients. Only such activities will convince borrowers that they truly need MFIs, and should demonstrate against state action to hobble these.
The above prescriptions are an excerpt from today's op-ed by SSA Aiyar.

Government and regulators are at loggerheads over FSDC role

Take a look at this news report on the subject. It is interesting to note the differences.
What is the conflict between the government and the regulators?

Financial sector regulators led primarily by RBI and Sebi want the Financial Stability and Development Council, or FSDC, to focus only on financial stability. Both these regulators do not want the mandate of the council to include financial sector reforms. The government looks at it otherwise.

Why are the regulators wary of financial sector reforms being part of FSDC's mandate?

Both RBI and Sebi reckon that bringing the issue of financial sector reforms to the FSDC table runs the risk of impinging on their autonomy. Such reforms should rather be debated and finalised at another forum where all policymakers are represented.

PSBs will get to sever ties with RRBs

The government may allow public sector banks to exit from regional rural banks, or RRBs, they sponsored if they are not keen on investing more capital into these dedicated lenders.
The suggestion to let banks move out of RRBs had come up during deliberations on the report of an expert panel set up to suggest measures to strengthen the rural banks.
There are 82 RRBs in the country with a network of 15,475 branches. The country's largest lender, State Bank of India, alone sponsored 17 RRBs. While the Centre owns 50% stake in an RRB, the sponsoring bank holds 35% and the concerned state government the remaining 15%.
The Chakrabarty committee has observed in its report that states are also reluctant to infuse more capital in the expansion of RRBs as they are not fetching them good dividends.

What is a deep discount bond?

A deep-discount bond is a bond that sells at a discount from the par value. Often, these bonds have very low coupon or interest rates. In some cases, it is zero and also called zero coupon bonds. Such bonds are considered riskier and hence, the discount in order to attract the investor. Though these bonds carry lower coupon rates, they provide call option to investors. This provides liquidity to the bond. In India, the deep-discount bond was first issued by term-lending institutions like IDBI around early 1990s to finance long-term development projects.

Language Lessons

gravy train: Noun

Used to refer to a situation in which someone can make a lot of money for very little effort

at sixes and sevens: Idiom

In a state of confusion; In a state of dispute or disagreement

Current Affairs 17th January 2011

2011-01-20T00:34:00.001+05:30

17^th January 2011

Politics & the Nation

Governance slow down abnormally

The government's stamina for running the course with policy decisions nosedived in 2010. This confirms the widespread sense that governance has suffered in UPA's second term, with the ruling coalition besieged by corruption scandals, bickering ministers and the absence of a strong power centre.
The union cabinet managed to sign off on an abysmally lower number of decisions in 2010 compared with previous years. During UPA's first term, between 2005 and 2008, the cabinet took an average of 242.5 decisions every year. The average for every year of UPA rule since 2005 is 183 cabinet decisions per year. In 2010, a year marked with big corruption scandals, parliament paralysis and ministers working at cross-purposes, the cabinet managed to agree on just 112 decisions, the lowest single-year tally since UPA assumed power.

Finance ministry blocks PF payout @ 9.5%

The finance ministry has rejected the 9.5% interest pay out proposed on provident fund savings for 2010-11 saying the 'surplus funds' found by the PF department from its past accounts were 'unverifiable.'
Labour Minister Mallikarjun Kharge had recommended raising the employees' provident fund (EPF) rate to 9.5% in September 2010 after the PF department's accounts revealed a surplus from the past.
The EPF rate has been at 8.5% since 2005-06 and the rate would have stayed the same in 2010-11 as per its earnings. But a review exercise of EPFO's Interest Suspense Account, where EPF's annual income is parked till it is distributed to members, revealed a surplus of about Rs. 2,000 crore.
While the EPFO board cleared the 9.5% PF rate on this basis, the finance ministry had commissioned a special audit of the accounts in question by the Comptroller and Auditor General of India (CAG).
The CAG found that the surplus amount cited in the suspense account can not be verified till all accounts are updated by the EPFO. The CAG usually audits EPFO's accounts at the end of a financial year.
EPF interest is manually credited to workers' accounts. On 31 March 2010, the suspense account had a balance of . 27,000 crore — which means EPFO's dated systems had not credited that much interest due to its 5 crore members' accounts. More than 11 crore account statements were pending on April 1, 2009.

Fuel duty tweak to shield buyers, clean oilco books

After raising petrol prices by 2.50 per litre, the government has decided to spare consumers from higher rates for cooking gas and diesel by tinkering with the tax regime to ensure oil companies can boost revenues without increasing pump prices.
The government will convene an emergency meeting of top cabinet ministers next week to review the tax regime in the oil sector. This will help it cut duties on crude oil and refined products well before the budget to help oil companies quickly shore up their balance sheets without accelerating inflation, which has remained well above 5.5%, the comfort level of the Reserve Bank of India.
According to an oil ministry estimate, fuel retailers' revenue losses have soared by over 58% this year from Rs 46,051 crore in 2009-10. The three firms' combined net profit in 2009-10 was Rs 13,060 crore after the government's cash compensation of Rs 26,000 crore, which was 56% of their revenue loss. This financial year, the finance ministry is willing to give only Rs 24,266 crore, which is one-third of the oil firms' total revenue loss.
IOC, India's largest fuel retailer with over 50% market share by volume, is losing Rs 6.99 per litre on diesel, Rs 19.60 per litre on kerosene and Rs 366.28 per cylinder on cooking gas.

Finance & Economy

IndiGo flies high

IndiGo has placed, by far the largest order for aircraft on Airbus for 180 Airbus planes. Delivery is set to commence in 2016 and end in 2025. The $15.6 billion purchase is hugely significant for Indian aviation. The projection is that India would be the third-largest aviation market by 2020.

Are we fighting (if at all) a losing battle against inflation?

This is the conclusion we will get to, on reading this op-ed from Mythili Bhusnurmath. She explains our failings in the fight against inflation very well. Take a look. A must read.

While we are getting the jitters on the inflation front, India Inc is gung-ho about our growth prospects

Take a look at this article by Sunil Mittal. His bullishness on the medium terms prospects rests on the following factors:
One, India has espoused an economic growth model that targets rapid GDP growth with inclusive development. Over the last few years, specific policies have been instituted to address marginalised and poor sections of society, especially in the rural areas, including a rural employment guarantee scheme that now impacts 50 million households. These policies have imparted high dynamism to the rural economy. For example, in 2002, the rate of telephony penetration in rural areas was 1.2%; today, it has crossed 21%.
Second, India has attained high savings and investment rates. In 2007-08, the investment rate was close to 38%, a shift of five percentage points in just four years. The unprecedented developments of 2008-09 lowered the rate to 35%. Given the government's committed efforts at fiscal consolidation and strong corporate investment, the investment rate is likely to revert to the earlier high in a couple of years, propelling future growth.
Third, the country's growth is largely driven by domestic demand. This is fuelled by a growing middle-class population, young consumers, and rising per-capita incomes. Middle-income consumers are estimated to rise from less than 15 million households in 2005 to almost 70 million households by 2015, and further to 140 million by 2025, a dynamic and diversified market for a global producer. Further, as India enters the sweet spot in its demographic experience, its rising productivity and burgeoning markets will be a major global growth engine.
Fourth, India's reform process is still a work in progress. From 1991 onwards, successive governments have remained steadfast on the reforms process, igniting a new growth cycle.
Fifth, the country's infrastructure mission will be a major opportunity for global business. In the five years from 2012 to 2017, the country plans to significantly step up its infrastructure spending to $1 trillion. Public-private partnership (PPP) is a major plank of infrastructure engagement, and much investment is expected to come from overseas sources.
Finally, India is rapidly integrating with the global economy. Its exports almost trebled in the five years before the global economic crisis. More significantly, the country's demand for goods from the rest of the world went up by close to four times in this period.

Value-based excise duty to replace flat levy in shift to GST

The government could replace the flat rupee-denominated excise levy on some manufactured goods with the usual percentage-based system, or ad valorem basis, in the budget as a step towards the proposed goods and services tax, or GST. It could also prune the list of items that enjoy exemption from excise duty.
Ad valorem taxes are levied as a proportion of value of product and the absolute amount collected rises with the value of the good manufactured.
In contrast, specific taxes are flat levies not related to the value of good produced.
Though, most manufactured goods attract duty on an ad valorem basis, there are still a number of items that are levied specific duty or have a specific component over and above a regular duty.
Coffee, tea, spices, cement, salt, tobacco, sugar and sugar products, automobiles, auto parts and petroleum and petroleum products are some items that attract duty on specific basis.
The government also levies cesses, which are in the nature of specific duties, on many goods to raise funds for a particular purpose.

Technology

A new buzzword that we all shold be familiar with

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

Language Lessons

dotty: Adjective

(of a person, action, or idea) Somewhat mad or eccentric

grandiloquent: Adjective

Pompous or extravagant in language, style, or manner, esp. in a way that is intended to impress

Current Affairs 15th January 2011

2011-01-16T16:22:00.002+05:30

15^th January 2011

Politics & the Nation

Indian farmers look to reap rich gains in Madagascar

The island nation of Madagascar, located off Africa's southeast coast, is drawing farmer-entrepreneurs in large numbers from India's breadbasket, Punjab and Haryana.
They expect to hit pay dirt as authorities in the former French colony lease out land for 50 or more years at prices as low as $15 (nearly 690) per acre a year for skilled farmers from abroad. Over the past few years, these new migrants from the cradle of India's first Green Revolution have grown maize, pulses and peanuts, and are looking to try new crop varieties there.
While Madagascar, which opened up its economy recently, is hard-selling itself to attract overseas funds and skills across sectors with sops, entrepreneurs see themselves as huge beneficiaries of this give-and-take measure.

Some details about JNNURM

JNNURM encompasses implementation of the 23 reforms, worked out in consultation with the states and committed to by states and cities through memoranda of agreement to be implemented as per periodic milestones agreed. The reform agenda, covering four broad areas like governance, citizen-responsive and process-oriented, land and property-related and financial, was widely welcomed because before the mission, the cities were not in a position to take up these much-needed reforms even if they wanted and it was high time that a push for these came from somewhere. There may not be any other flagship programme that walks on the two legs of reforms and funds for projects. And this stands out as a unique feature of the urban programme.
Governance reforms cover implementation of the 74th Constitution Amendment, transfer of city planning function to the local bodies, administrative as well as structural reforms and encouraging PPP, all to be undertaken by state governments, and revision of municipal bylaws and provision of basic services, to the urban poor to be implemented by the city bodies.
The second category of reforms is process-oriented and citizen-responsive such as adoption of double entry system of accounting, introduction of the system of e-governance, both to be taken up by the local bodies, whereas rationalisation of stamp duty to a uniform 5% across the country, enactment of public disclosure and community participation laws are the state mandate.
Land- and property-related reforms cover reform of property tax and earmarking at least 20% to 25% of developed land for weaker sections, both to be done at the city level, whereas the state has to take steps to introduce computerised process of registration, repeal of urban land ceiling, amendment of rent control and introduction of property title certification.
The fourth category of reforms aim at financial sustainability such as levy of reasonable user charges and city-wide property tax coverage and collection.

SC questions govt on black money

The Supreme Court on Friday questioned the government's reluctance on disclosing information about the Indians who allegedly have parked huge unaccounted money in foreign banks.
The court was hearing a petition filed by noted criminal lawyer Ram Jethmalani, who along with some retired bureaucrats and police officers, approached it seeking directions to the government to take steps to bring black money stashed in foreign banks.

Finance & Economy

Anil & co to keep off listed stocks for a year

Anil Ambani and four top executives of two firms controlled by him will not be able to invest in listed stocks till the end of this year as part of a settlement of an investigation into the alleged use of borrowed overseas funds to invest in the stock market.
Two Anil Dhirubhai Ambani Group companies—Reliance Infrastructure and Reliance Natural Resources (RNRL)—will also have to keep away from the secondary market till December 2012, market regulator Sebi said in an order posted on its website on Friday evening. But both will be free to raise funds by issuing new securities.
Ambani and the four officials—Satish Seth, SC Gupta, JP Chalasani and Lalit Jalan—have paid a settlement charge of 50 crore without admitting or denying the charges. The five have made the payment on behalf of the companies, according to the order.
The settlement, which was finalised earlier this week, relates to a case of alleged misuse of funds raised by ADAG through foreign borrowings to invest in the Indian stock markets using overseas investment vehicles.
According to the order, the regulator said it launched a probe after it received information that money raised through foreign borrowings and foreign currency convertible bonds by Anil Ambani group companies were invested in the stock market, including shares of Reliance Communications, another company owned by Ambani. Overseas investment vehicles were allegedly used for this.
A consent order—similar to an out-of-court-settlement—comes about if a person or a firm facing a probe related to the securities market submits an application to Sebi without admission of guilt and without denial of liability.

RBI cracks the whip on fund diversion by cos

The Reserve Bank of India has said some corporate clients of banks have diverted loans meant for business purposes and has provided a six-step approach to prevent such diversion.
The six steps banks should follow are: meaningful scrutiny of the periodical progress reports; regular visits to assisted units and inspection of securities charged; periodical scrutiny of accounts; introduction of stock audits; initiation of prompt action if warranted, including withdrawal loans; and examination of all aspects of diversion of funds during internal audit.
Although the RBI did not explicitly state why the circular has been issued now, many believe the series of corruption episodes, including the Citibank fraud, might have forced it to let banks know that it is watching. Many officials, including executives of LIC Housing Finance and Bank of India, were arrested last year in the bribes-for-loans scandal. Also, there were preliminary enquiries into loans given to some real estate companies, a sector the central bank has flagged as 'sensitive'.

Citibank to compensate investors duped by Puri

Citibank will compensate all clients of Shivraj Puri, the rogue relationship manager who embezzled several wealthy investors.
The bank is in the middle of reconciling the accounts of these high networth individuals (HNIs), who either put money in the sham investment scheme floated by Puri or trusted him to manage their savings.
Of Puri's 40 clients, Citi will approach 12-13 in the next few days with formal settlement terms that will enable these investors recover the principal amounts. Negotiations with these customers have been completed. Subsequently, compensation terms will be discussed with other investors who dealt with Puri.
Puri dealt with three kinds of investors. Some like Aggarwal, who are wealth management clients of Citi with investment accounts. There are others who had no account with Citi, but were independently approached by Puri. In the latter case, Puri credited cheques from these investors to a collection or custodian account named after his grandfather Premnath.
Puri, the mastermind in the estimated Rs 400-crore fraud, was remanded to 14 days' judicial custody by a local court on Friday.

Current state of renewable energy in India

This is an excellent article that looks at the issue and also gives us some important statistics in regard to energy sector in India. Worth a read.

World Bank lends $1.7b for roads, fighting cyclones

The World Bank on Friday pledged $1.72 billion in loans to India, mainly for building 24,000 km of roads in rural areas.
The global lending agency also pledged $255 million to the first phase of a project that aims to mitigate effects of cyclones.

Inflation at 8.43%, rate hike looms

India's inflation rate accelerated by almost a percentage point in December, increasing pressure on the Reserve Bank of India to hike key interest rates in its monetary policy review due later this month.
The wholesale price index (WPI) rose 8.43% in the month from a year ago, government data showed on Friday. The index was at 7.48% in the previous month.
The surge in the data for December was largely driven by food items, which carry a 14.3% weight in the WPI. Inflation in food items quickened to 13.55% in December from 9.41% in the month before. Fuel inflation was up at 11.19% from 10.32%.
Economist were, however, more concerned with the momentum in the so-called core inflation, a measure that strips out the volatile food and fuel items. Core inflation is considered a better indicator of the underlying long-term inflation and largely corresponds with inflation in non-food manufactured products.

New Deputy Governor for RBI

The government has approved the appointment of Anand Sinha, a career senior central bank official, as a deputy governor of the Reserve Bank of India (RBI).
Mr Sinha will be the fourth deputy governor at RBI, joining Shyamala Gopinath, KC Chakrabarti and Subir Gokarn. He will succeed Usha Thorat who retired a little over a month ago. Two deputy governors are appointed from within the central bank, besides a banker and an economist.
Mr Sinha, who turns 60 next month, may get a two-year term since deputy governors normally get to serve till the age of 62.

International

China tops US as No 1 economy by purchasing power

China overtook the US last year as the world's biggest economy when measured in terms of purchasing power.
The size of China's economy in 2010 was $14.8 trillion, compared with the US's $14.6 trillion, when accounting for the countries' differing costs of living.
Purchasing power parity calculates gross domestic product using exchange rates that adjusts for price differences of the same goods between nations.
China's GDP per capita, which reflects the average standard of living, would increase to $11,047 from the $7,518 estimated by the IMF in its World Economic Outlook.

Rising debt may put US' AAA rating at risk

Two major credit ratings agencies warned Thursday that the United States might tarnish its triple-A credit rating if its national debt kept growing. It was not the first time the agencies, Standard & Poor's and Moody's Investors Service, warned that the nation's gilt-edged rating might fall into jeopardy.
In a quarterly report on the nation's credit risk, Moody's said there was an increasing probability of revising its outlook on its Aaa rating for the United States to negative from stable within the next two years if no action were taken.
That stops well short of actually reducing the rating. But even a small revision, if it comes, would probably rattle the financial markets and might even hamper America's ability to borrow the money it needs to finance its deficit. Moody's has been rating US government debt since 1917 and has always rated it Aaa.
Only once, in 1996, did the agency put some US debt on review for possible downgrade — a much stronger step than a negative outlook. That was after Republicans refused to vote to increase the debt ceiling.

Preliminary Examination Syllabus 2011 - CSAT

2011-01-16T16:22:00.001+05:30

Preliminary Examination Syllabus 2011

Scheme of CS (Preliminary) Examination

The Preliminary Examination consists of two papers of objective type (multiple-choice questions) carrying a maximum of 400 marks. The Question Papers (Test Booklets) are set in English & Hindi

Civil Services Aptitude Test

The new Recruitment Process of Civil Services Exam is called the CSAT or the Civil Services Aptitude Test. The CSAT is coming into effect from the Civil Services Examination, 2011. CSAT will not only enable us to choose civil servants with right aptitudes but also end the use of scaling system for varying subjects that has been a matter of concern for many. No changes are being introduced at this stage in the Civil Services (Main) Examination and Personality Test in the scheme of Civil Services Examination (CSE).

From Civil Service Examination 2011, Preliminary Examination would consist of two papers- Paper I and Paper II. The syllabus and pattern of the Preliminary Examination would be as under :

(Paper 1) (200 marks) - Duration : Two hrs.

Current events of national and international importance
History of India and Indian national movement
Indian and World Geography- physical, social, economic geography of India and the world
Indian Polity and governance – constitution, political system, panchayati raj, public policy, Rights issues, etc.
Economic and social development – sustainable development, poverty, inclusion, demographics, social sector initiatives etc.
General issues on environmental ecology, bio-diversity and climate change-that donot require subject specialization
General science.

(Paper II) (200 marks) – Duration : Two hrs

Comprehension
Interpersonal skills including communication skills
Logical reasoning and analytical ability
Decision making and problem solving
General mental ability
Basic numeracy (numbers and their relations, orders of magnitude etc. (Class X level), Data interpretation (charts, graphs, tables, data sufficiency etc. –Class X level)
English language comprehension skills (Class X level)
Questions relating to English Language Comprehension skills of Class X level (last item in the Syllabus of Paper-II) will be tested through passages from English language only without providing Hindi translation thereof in the question paper.
The questions will be of multiple choice, objective type.

A set of sample questions for both Papers has been put on the UPSC website for reference of prospective candidates.

Preliminary Examination Syllabus 2011 - CSAT

2011-01-16T16:18:00.001+05:30

Preliminary Examination Syllabus 2011

Scheme of CS (Preliminary) Examination

The Preliminary Examination consists of two papers of objective type (multiple-choice questions) carrying a maximum of 400 marks. The Question Papers (Test Booklets) are set in English & Hindi

Civil Services Aptitude Test

From Civil Service Examination 2011, Preliminary Examination would consist of two papers- Paper I and Paper II. The syllabus and pattern of the Preliminary Examination would be as under :

(Paper 1) (200 marks) - Duration : Two hrs.

Current events of national and international importance
History of India and Indian national movement
Indian and World Geography- physical, social, economic geography of India and the world
Indian Polity and governance – constitution, political system, panchayati raj, public policy, Rights issues, etc.
Economic and social development – sustainable development, poverty, inclusion, demographics, social sector initiatives etc.
General issues on environmental ecology, bio-diversity and climate change-that donot require subject specialization
General science.

(Paper II) (200 marks) – Duration : Two hrs

Comprehension
Interpersonal skills including communication skills
Logical reasoning and analytical ability
Decision making and problem solving
General mental ability
Basic numeracy (numbers and their relations, orders of magnitude etc. (Class X level), Data interpretation (charts, graphs, tables, data sufficiency etc. –Class X level)
English language comprehension skills (Class X level)
Questions relating to English Language Comprehension skills of Class X level (last item in the Syllabus of Paper-II) will be tested through passages from English language only without providing Hindi translation thereof in the question paper.
The questions will be of multiple choice, objective type.

A set of sample questions for both Papers has been put on the UPSC website for reference of prospective candidates.

Time Management for Civils Preparation

2011-01-15T09:51:00.001+05:30

TIME MANAGEMENT

We see many people around us who spend their time in a frenzy of activity but achieve very little because they are not concentrating on the right things. They are perpetually busy but it does not necessarily mean that they make optimum utilization of their time. So there is a great need for effective Time Management in our lives today.

We keep hearing the word "Busy" a lot. There are two kinds of busy, chaotic, disorganized busy and calm effective busy. It goes without saying that being the latter helps to pack in more productivity in your work. Improving our "effectiveness Quotient" calls for mastery of basic time management skills.

We constantly hear the refrain that we do not know where the time goes. Whether you are an executive, a student or a homemaker, you need to achieve more in every minute of the day and to enjoy each task that you take up. We will be well on our way to the top if we know how to squeeze the most out of even a minute.

The first thing to bear in mind is to question whether you have a personal sense of time or a time log. This helps you to keep track of how you spend each hour. There is a way to do this. Divide each day for a period of two weeks into one hour intervals and jot down what you do in them. You can sub divide the activities under such headings as business meetings, writing, making phone calls, reading, time spent with the family etc. At the end of the week, examine your time log.

What you may find is that very little time goes into top priority activities and more into activities such as phone calls, coffee breaks, chatting with friends etc. Now is the time to analyze what activities are a waste of time and what need more time. Try to cut down time spent on useless activities or stop doing them altogether. Once you have prioritized your time, you will find your efficiency level rising and the end result is that you will be an achiever!

Current Affairs 13th January 2011

2011-01-13T22:24:00.001+05:30

13.01.2011

Politics & the Nation

What is pushing the farmers (predominantly) to suicide? (Excerpt from an op-ed in today's ET)

Suicide is a sad and complex phenomenon. Incidents of suicide among farmers are mostly localised in a few pockets in six states in the country: Andhra Pradesh, Maharashtra, Karnataka, Punjab, Chhattisgarh and Kerala. It is not clear as to what is extraordinary about these states that trigger such extreme reactions from farmers. Quite possibly, economic, social and institutional changes in recent years are responsible for the high rate of suicide in some regions. At the same time, certain other societal forces that block modernisation may also be triggering such extreme reactions. Clearly, to blame suicide among farmers on largely external factors such as liberalisation and globalisation misses a major part of the story.

Cairn-Vedanta deal to get nod next month

The government is poised to clear the $9.6-billion Cairn-Vedanta deal by the middle of February, ending five months of uncertainty over the controversial deal involving the transfer of India's biggest onshore oilfield operated by the British explorer.
The oil ministry has asked Oil and Natural Gas Corporation (ONGC) to stop obstructing the transaction and accept the fact that it is contractually bound to pay its partner's share of royalty in the venture in which the state explorer was given a 30% equity free of cost. State-run ONGC, hoping to renegotiate the contract, had declared it had pre-emptive rights and the deal could not be completed without its approval.
The government has now rejected ONGC's request to ease the royalty burden. India had offered royalty exemption to companies as an incentive to lure private capital to oil exploration in the energy-deficient country.
The value of total royalty payout is estimated at $2 billion for the life of the field at the approved output. Cairn is currently pumping 125,000 barrels of oil from the Rajasthan field and expected to ramp it up to an approved peak production of 175,000 barrels by next year.
Vedanta Resources, controlled by London-based billionaire Anil Agarwal, had agreed to buy up to 60% of the Indian unit of Scottish firm Cairn Energy for $9.6 billion on August 16.
As per the proposed deal, Vedanta Group will acquire 51-60% of Cairn India for about $8.5-9.6 billion in cash. Post-deal, it is expected that Vedanta Resources will hold 31-40% stake in Cairn India directly and group company Sesa Goa will hold 20%.

Finance & Economy

Titbits about our defence capabilities

We have nine defence public sector undertakings and 49 ordnance factories.
While Tejas is our indigenous defence aircraft, Saras is our indigenous civil aircraft.

Some excellent thoughts on reigning in vegetable prices

Take a look at this op-ed penned by TK Arun. Worth a read. Are Nitish and Buddha listening? It's their chance to become another Narendra Modi or Kurien.
An excerpt:
A supply chain and trading system that give such enormous leverage to middlemen do serious damage of two kinds: one, transmission of the price signal arising at the consumer all the way to the farmer turns fuzzy and, two, the trader acquires the power to manipulate prices. An organised retail industry is the only thing that can tackle this.
Here are five policy steps that may help in the process of reining in food inflation. (The following is from another article that appeared in ET)
Deflate the stimulus package. There seems to be excess liquidity in the system, both globally and in India, as a result of the fiscal stimulus given over the last two years to ensure recovery of growth. It has delivered high growth but has also lead to commodity price inflation almost worldwide. In India, during the last two years, money supply has been growing at almost 20% per annum while agricultural production has grown by only about 3% on average. Too much money chasing too few agri-goods! It is time for a calibrated winding down of this stimulus package by tightening the monetary policy.
Augment supplies of agri-products.In the short run, it can be done by releasing stocks of wheat, rice and sugar — luckily, the government has much more stocks than warranted by buffer stock norms — and reducing import duties to less than 10% on fruit and vegetables, milk and milk products, etc, where inflation rates are very high. This will give immediate relief to consumers.
Reform the archaic mandi system. Our agrimandis are in a mess. The APMC has made the value chains long, fragmented and inefficient by blocking competition. The current system rewards middlemen, or commission agents, but does not benefit the farmer or the consumer. The government should invite and incentivise private sector (both domestic and foreign), cooperatives and NGOs to come up with business models that directly link the growers with processors and retailers. The commissions in the mandi system, especially for fruit and vegetables, need to be restricted to less than 1% compared to 6-8% that is prevailing in most places. Rationalise taxes and fees in the mandi system. In principle, all food products should be exempt from taxes or fees at the first stage of marketing — these go up to more than 10% in the case of wheat in Punjab and Haryana. These need to be replaced by value added tax (VAT), and the states losing revenue will need to be directly compensated by the Centre.
Set up a commercial intelligence unit for sensitive commodities. This proposed unit needs to combine information on the production status of key crops from crop forecasting division, on market price status from the marketing division, on stocks, tariffs and trade, and global market situation, and then analyse all these to recommend policy action well in time. This should be done on a monthly basis, if not fortnightly.
Bring the agriculture reform agenda on priority. The country has had two decades of reforms in industry and services sectors, but agriculture has been waiting for long for a serious package of reforms. Piecemeal efforts will not deliver. The country's agri-GDP growth is stuck at less than 3% per annum, and extremely volatile in nature. With the challenge of climate change looming large, sustainable agricultural growth will require higher investment in agri-R&D and extension, water and soil management, and also in logistics, processing, packing, and organised retailing.

It's 'worrying' as IIP dips to 2.7%

The industrial output growth plunged to an 18-month low of 2.7% in November, prompting Finance Minister Pranab Mukherjee to call the dip 'worrying'.
Independent experts, however, dismissed the fall, terming it a slight moderation and a data quality issue. They also backed a move to raise key interest rates to contain inflation.
The factory output growth, as measured by the Index of Industrial Production, or IIP, was 11.3% in October. Economists had estimated the growth for November at 6.6%.
Industry has an 18% weight in the GDP.
The decline in industrial production was driven largely by a slowdown in manufacturing, the largest component in the IIP.
Manufacturing grew 2.3% in November as against 12.25% in the year-ago month.The slowdown was largely because of a 3.1% contraction in production of consumer goods, 4.3% growth in durables and 6% contraction in non-durables.
A look at this graphic is worth the time.

Work speeded up on new index

The government is accelerating the rollout of a new Index of Industrial Production, or IIP, after several agencies voiced concern over the high volatility of the current index.
The IIP measures factory output growth.
A government-appointed panel, chaired by Planning Commission member Saumitra Chaudhury and comprising economic advisers of various ministries, is examining the new index, which has been prepared by the Central Statistical Organisation (CSO).
The move to set up a new index followed reservations expressed by several organisations, including the Reserve Bank of India, over the current index. These agencies had said that the index, with a 1993-94 base year, has become outdated. They said its product basket was not representative enough as it included several items that are no longer in much use, such as typewriters. The current series of IIP was also criticized for its extreme volatility.
The ministry of statistics then directed the CSO to create a new index with a base year of 2004-05. This index included a new basket of 500 products. But the plan to introduce the new index was delayed after its trial runs showed it to be no less volatile than the current IIP.
The government then appointed an expert panel to review the basket of products, reassign weights to reflect current reality, especially in segments such as capital goods and consumer non-durables.
People close to the development say the revised index will include laptops, mobile phones, LCDs and a number of chemicals that were not manufactured at the time of the last base revision in 1993-94. Weightage to the items would be given in accordance to their share in the gross domestic product.

IndiGo goes shopping, picks up180 jets

Gugaon based low-cost airline IndiGo has ordered 180 Airbus A320s from European aircraft manufacturer Airbus for a valuation of $15.6 billion ( 70,000 crore), indicating that the aviation industry is beginning to fly out of turbulence.
The deliveries are expected to begin from 2016 and continue till 2025. IndiGo currently has a fleet of 34 Airbus A320s. It flies to 24 destinations and has 221 daily flights.
The national carrier, Air India, had earlier placed an order for 111 Boeing and Airbus aircraft for $11 billion in 2005. The aviation market in India has been growing at 15% and is poised to expand by 20% in the near future, surpassing booming markets such as China and Brazil.
According to Airbus, IndiGo will use 100 of the 180 aircraft for fleet replacement while the remaining 80 will be used to add capacity.

Microfinance faces hard times

MFIs have been seeing a shortfall in interest income and cash, since October. Micro-loan borrowers, mostly poor women, were already distressed because of a dip in their incomes and the multiple loans they were servicing. Cushioned by the new law, provoked by local politicians and emboldened by the prevailing climate of antipathy towards MFIs, they have stopped repaying.
Andhra leads all states in micro-loans, with a share of 35%. Now, it has an ordinance that requires MFIs to take government approval before granting a loan, bans weekly collection of dues, and stops lenders from collecting instalment from a borrower's house. Basically, it makes it almost impossible for MFIs to do business.
January 15 onwards, MFIs will feel the second hit: provisioning. Under the rules set by the Reserve Bank of India, the central bank, if an MFI does not receive interest income for three months, it has to provide for 10% of the loan amount.
Weekly rotation of cash is critical to MFI operations — and profitability. Since they are barred from taking cash deposits, MFIs functioning as a non-banking finance company (NBFC) rely on three sources of funds: equity and grants, surplus from past operations, and loans from banks. Bank loans accounted for 71% of MFI funds in 2009-10. An MFI borrows from banks at 11-14% and lends it on, mostly to poor women, at an average lending rate of 28%.
MFIs also profit from rotating the money. MFIs repay banks on a quarterly or halfyearly basis; however, their borrowers repay MFIs on a weekly basis.

International

Why the European bailout is set to fail

The return of European sovereign debt problems in late 2010, culminating in the bailout of Ireland, highlighted the deep seated and perhaps intractable problems of some over indebted European nations.
As in the case of Greece, the bailout package dealt only with short-term liquidity, failing to address Ireland's longer term solvency. The arrival of an IMF/EU team to prescribe a "cure" did not inject confidence in an imminent recovery.
The Irish bailout facility totalled €85 billion, made up of €35 billion for the banking system (€10 billion for immediate recapitalisation and €25 billion to be provided on a contingency basis) and €50 billion to cover the financing of the state. Estimates suggested that Irish banks alone required around €16 billion in capital and further €38 billion in financing. This totalled €54 billion, a large chunk of the €85 billion package. Given that Ireland required €70 billion to meet maturing debt until 2013, the size of the bailout facility was arguably inadequate.
In the absence of strong economic growth, inflation and a massive devaluation, the peripheral economies like Ireland and Greece, may be able to shrink themselves to solvency.
A simple relationship demonstrates the unsustainable position:
Changes In Government Debt = Budget Deficit + [(Interest Rate – GDP Growth) X Debt]
In order to restore solvency, overburdened borrowers must stabilise debt and begin to reduce the level of borrowing. This requires GDP growth exceeding interest rates or a budget surplus. EU/IMF assistance to Ireland was designed to address the high yields on Irish bonds, which curtailed the state's ability to borrow. But the 5.80% cost of the bailout debt requires an equivalent growth rate and a balanced budget simply to stabilise debt at current very high levels.
Based on IMF's best estimates, there is little prospect of many European countries returning to balanced budgets any time soon. Given the toxic conjunction of high cost of funding, low growth and high starting level of debt, it is near impossible for these countries to contain the spiral to a restructuring of their debt or default.

Language Lessons

certitude: Noun

Absolute certainty or conviction that something is the case

oenology: Noun

It is the science and study of all aspects of wine and winemaking except vine-growing and grape-harvesting, which is a subfield called viticulture.

libation: Noun

A libation is a ritual pouring of a drink as an offering to a god or spirit or in memory of those who have died.

Sisyphean: Adjective

Both extremely effortful and futile

schizophrenia: Noun

Any of several psychotic disorders characterized by distortions of reality and disturbances of thought and language and withdrawal from social contact

Current Affairs 13th January 2011

2011-01-13T22:22:00.001+05:30

13.01.2011

Politics & the Nation

What is pushing the farmers (predominantly) to suicide? (Excerpt from an op-ed in today's ET)

Suicide is a sad and complex phenomenon. Incidents of suicide among farmers are mostly localised in a few pockets in six states in the country: Andhra Pradesh, Maharashtra, Karnataka, Punjab, Chhattisgarh and Kerala. It is not clear as to what is extraordinary about these states that trigger such extreme reactions from farmers. Quite possibly, economic, social and institutional changes in recent years are responsible for the high rate of suicide in some regions. At the same time, certain other societal forces that block modernisation may also be triggering such extreme reactions. Clearly, to blame suicide among farmers on largely external factors such as liberalisation and globalisation misses a major part of the story.

Cairn-Vedanta deal to get nod next month

The government is poised to clear the $9.6-billion Cairn-Vedanta deal by the middle of February, ending five months of uncertainty over the controversial deal involving the transfer of India's biggest onshore oilfield operated by the British explorer.
The oil ministry has asked Oil and Natural Gas Corporation (ONGC) to stop obstructing the transaction and accept the fact that it is contractually bound to pay its partner's share of royalty in the venture in which the state explorer was given a 30% equity free of cost. State-run ONGC, hoping to renegotiate the contract, had declared it had pre-emptive rights and the deal could not be completed without its approval.
The government has now rejected ONGC's request to ease the royalty burden. India had offered royalty exemption to companies as an incentive to lure private capital to oil exploration in the energy-deficient country.
The value of total royalty payout is estimated at $2 billion for the life of the field at the approved output. Cairn is currently pumping 125,000 barrels of oil from the Rajasthan field and expected to ramp it up to an approved peak production of 175,000 barrels by next year.
Vedanta Resources, controlled by London-based billionaire Anil Agarwal, had agreed to buy up to 60% of the Indian unit of Scottish firm Cairn Energy for $9.6 billion on August 16.
As per the proposed deal, Vedanta Group will acquire 51-60% of Cairn India for about $8.5-9.6 billion in cash. Post-deal, it is expected that Vedanta Resources will hold 31-40% stake in Cairn India directly and group company Sesa Goa will hold 20%.

Finance & Economy

Titbits about our defence capabilities

We have nine defence public sector undertakings and 49 ordnance factories.
While Tejas is our indigenous defence aircraft, Saras is our indigenous civil aircraft.

Some excellent thoughts on reigning in vegetable prices

Take a look at this op-ed penned by TK Arun. Worth a read. Are Nitish and Buddha listening? It's their chance to become another Narendra Modi or Kurien.
An excerpt:
A supply chain and trading system that give such enormous leverage to middlemen do serious damage of two kinds: one, transmission of the price signal arising at the consumer all the way to the farmer turns fuzzy and, two, the trader acquires the power to manipulate prices. An organised retail industry is the only thing that can tackle this.
Here are five policy steps that may help in the process of reining in food inflation. (The following is from another article that appeared in ET)
Deflate the stimulus package. There seems to be excess liquidity in the system, both globally and in India, as a result of the fiscal stimulus given over the last two years to ensure recovery of growth. It has delivered high growth but has also lead to commodity price inflation almost worldwide. In India, during the last two years, money supply has been growing at almost 20% per annum while agricultural production has grown by only about 3% on average. Too much money chasing too few agri-goods! It is time for a calibrated winding down of this stimulus package by tightening the monetary policy.
Augment supplies of agri-products.In the short run, it can be done by releasing stocks of wheat, rice and sugar — luckily, the government has much more stocks than warranted by buffer stock norms — and reducing import duties to less than 10% on fruit and vegetables, milk and milk products, etc, where inflation rates are very high. This will give immediate relief to consumers.
Reform the archaic mandi system. Our agrimandis are in a mess. The APMC has made the value chains long, fragmented and inefficient by blocking competition. The current system rewards middlemen, or commission agents, but does not benefit the farmer or the consumer. The government should invite and incentivise private sector (both domestic and foreign), cooperatives and NGOs to come up with business models that directly link the growers with processors and retailers. The commissions in the mandi system, especially for fruit and vegetables, need to be restricted to less than 1% compared to 6-8% that is prevailing in most places. Rationalise taxes and fees in the mandi system. In principle, all food products should be exempt from taxes or fees at the first stage of marketing — these go up to more than 10% in the case of wheat in Punjab and Haryana. These need to be replaced by value added tax (VAT), and the states losing revenue will need to be directly compensated by the Centre.
Set up a commercial intelligence unit for sensitive commodities. This proposed unit needs to combine information on the production status of key crops from crop forecasting division, on market price status from the marketing division, on stocks, tariffs and trade, and global market situation, and then analyse all these to recommend policy action well in time. This should be done on a monthly basis, if not fortnightly.
Bring the agriculture reform agenda on priority. The country has had two decades of reforms in industry and services sectors, but agriculture has been waiting for long for a serious package of reforms. Piecemeal efforts will not deliver. The country's agri-GDP growth is stuck at less than 3% per annum, and extremely volatile in nature. With the challenge of climate change looming large, sustainable agricultural growth will require higher investment in agri-R&D and extension, water and soil management, and also in logistics, processing, packing, and organised retailing.

It's 'worrying' as IIP dips to 2.7%

The industrial output growth plunged to an 18-month low of 2.7% in November, prompting Finance Minister Pranab Mukherjee to call the dip 'worrying'.
Independent experts, however, dismissed the fall, terming it a slight moderation and a data quality issue. They also backed a move to raise key interest rates to contain inflation.
The factory output growth, as measured by the Index of Industrial Production, or IIP, was 11.3% in October. Economists had estimated the growth for November at 6.6%.
Industry has an 18% weight in the GDP.
The decline in industrial production was driven largely by a slowdown in manufacturing, the largest component in the IIP.
Manufacturing grew 2.3% in November as against 12.25% in the year-ago month.The slowdown was largely because of a 3.1% contraction in production of consumer goods, 4.3% growth in durables and 6% contraction in non-durables.
A look at this graphic is worth the time.

Work speeded up on new index

The government is accelerating the rollout of a new Index of Industrial Production, or IIP, after several agencies voiced concern over the high volatility of the current index.
The IIP measures factory output growth.
A government-appointed panel, chaired by Planning Commission member Saumitra Chaudhury and comprising economic advisers of various ministries, is examining the new index, which has been prepared by the Central Statistical Organisation (CSO).
The move to set up a new index followed reservations expressed by several organisations, including the Reserve Bank of India, over the current index. These agencies had said that the index, with a 1993-94 base year, has become outdated. They said its product basket was not representative enough as it included several items that are no longer in much use, such as typewriters. The current series of IIP was also criticized for its extreme volatility.
The ministry of statistics then directed the CSO to create a new index with a base year of 2004-05. This index included a new basket of 500 products. But the plan to introduce the new index was delayed after its trial runs showed it to be no less volatile than the current IIP.
The government then appointed an expert panel to review the basket of products, reassign weights to reflect current reality, especially in segments such as capital goods and consumer non-durables.
People close to the development say the revised index will include laptops, mobile phones, LCDs and a number of chemicals that were not manufactured at the time of the last base revision in 1993-94. Weightage to the items would be given in accordance to their share in the gross domestic product.

IndiGo goes shopping, picks up180 jets

Gugaon based low-cost airline IndiGo has ordered 180 Airbus A320s from European aircraft manufacturer Airbus for a valuation of $15.6 billion ( 70,000 crore), indicating that the aviation industry is beginning to fly out of turbulence.
The deliveries are expected to begin from 2016 and continue till 2025. IndiGo currently has a fleet of 34 Airbus A320s. It flies to 24 destinations and has 221 daily flights.
The national carrier, Air India, had earlier placed an order for 111 Boeing and Airbus aircraft for $11 billion in 2005. The aviation market in India has been growing at 15% and is poised to expand by 20% in the near future, surpassing booming markets such as China and Brazil.
According to Airbus, IndiGo will use 100 of the 180 aircraft for fleet replacement while the remaining 80 will be used to add capacity.

Microfinance faces hard times

MFIs have been seeing a shortfall in interest income and cash, since October. Micro-loan borrowers, mostly poor women, were already distressed because of a dip in their incomes and the multiple loans they were servicing. Cushioned by the new law, provoked by local politicians and emboldened by the prevailing climate of antipathy towards MFIs, they have stopped repaying.
Andhra leads all states in micro-loans, with a share of 35%. Now, it has an ordinance that requires MFIs to take government approval before granting a loan, bans weekly collection of dues, and stops lenders from collecting instalment from a borrower's house. Basically, it makes it almost impossible for MFIs to do business.
January 15 onwards, MFIs will feel the second hit: provisioning. Under the rules set by the Reserve Bank of India, the central bank, if an MFI does not receive interest income for three months, it has to provide for 10% of the loan amount.
Weekly rotation of cash is critical to MFI operations — and profitability. Since they are barred from taking cash deposits, MFIs functioning as a non-banking finance company (NBFC) rely on three sources of funds: equity and grants, surplus from past operations, and loans from banks. Bank loans accounted for 71% of MFI funds in 2009-10. An MFI borrows from banks at 11-14% and lends it on, mostly to poor women, at an average lending rate of 28%.
MFIs also profit from rotating the money. MFIs repay banks on a quarterly or halfyearly basis; however, their borrowers repay MFIs on a weekly basis.

International

Why the European bailout is set to fail

The return of European sovereign debt problems in late 2010, culminating in the bailout of Ireland, highlighted the deep seated and perhaps intractable problems of some over indebted European nations.
As in the case of Greece, the bailout package dealt only with short-term liquidity, failing to address Ireland's longer term solvency. The arrival of an IMF/EU team to prescribe a "cure" did not inject confidence in an imminent recovery.
The Irish bailout facility totalled €85 billion, made up of €35 billion for the banking system (€10 billion for immediate recapitalisation and €25 billion to be provided on a contingency basis) and €50 billion to cover the financing of the state. Estimates suggested that Irish banks alone required around €16 billion in capital and further €38 billion in financing. This totalled €54 billion, a large chunk of the €85 billion package. Given that Ireland required €70 billion to meet maturing debt until 2013, the size of the bailout facility was arguably inadequate.
In the absence of strong economic growth, inflation and a massive devaluation, the peripheral economies like Ireland and Greece, may be able to shrink themselves to solvency.
A simple relationship demonstrates the unsustainable position:
Changes In Government Debt = Budget Deficit + [(Interest Rate – GDP Growth) X Debt]
In order to restore solvency, overburdened borrowers must stabilise debt and begin to reduce the level of borrowing. This requires GDP growth exceeding interest rates or a budget surplus. EU/IMF assistance to Ireland was designed to address the high yields on Irish bonds, which curtailed the state's ability to borrow. But the 5.80% cost of the bailout debt requires an equivalent growth rate and a balanced budget simply to stabilise debt at current very high levels.
Based on IMF's best estimates, there is little prospect of many European countries returning to balanced budgets any time soon. Given the toxic conjunction of high cost of funding, low growth and high starting level of debt, it is near impossible for these countries to contain the spiral to a restructuring of their debt or default.

Language Lessons

certitude: Noun

Absolute certainty or conviction that something is the case

oenology: Noun

It is the science and study of all aspects of wine and winemaking except vine-growing and grape-harvesting, which is a subfield called viticulture.

libation: Noun

A libation is a ritual pouring of a drink as an offering to a god or spirit or in memory of those who have died.

Sisyphean: Adjective

Both extremely effortful and futile

schizophrenia: Noun

Any of several psychotic disorders characterized by distortions of reality and disturbances of thought and language and withdrawal from social contact

Current Affairs January 11th 2011

2011-01-11T21:08:00.001+05:30

January 11^th 2011

Politics & the Nation

How should India deal with Pakistan and Afghanistan?

In these excerpts from a lecture delivered by Rajmohan Gandhi during the Saifuddin Kichlew Lecture at Jamia Millia Islamia, traces of some original thinking that proffers a more humane embrace with both of these countries are seen. Though we may not necessarily agree with the conclusion, the thoughts presented, though sound very utopian, are worth our attention. Makes a good reading.

Sibal onslaught against CAG estimates on 2G losses

With Union minister Kapil Sibal and his party firing a fresh salvo at the CAG over its calculation on the loss to the exchequer because of the sale of 2G spectrum, the confrontation between the ruling side and the Opposition is likely to intensify in the coming days, putting a question mark over the fate of the budget session of parliament.
On a day when the CAG said it stood by the 2G report submitted by it and the Supreme Court expressed its indignation over the Union minister's decision to trash the 1.76 lakh crore loss figure arrived at by the audit watchdog, Sibal sought to complicate matters by expressing doubts over its leakage in the media even before it could be submitted in parliament. The Congress, on its part, came out backing the Union minister, endorsing his contention that the allocation of the 2G spectrum had not resulted in any loss to the government.

Shunglu panel seeks info on OC staff from whistleblowers

VK Shunglu Committee, which is investigating allegations of corruption in organisation of Commonwealth Games 2010, has put up a list of 2,100 Organising Committee employees on the national portal and sought information regarding their appointments from whistleblowers and common citizens.
While making the list public, the committee has said, "It has been represented that several of these candidates are relatives of VIPs or friends of office bearers of the OC. It has been stated that some have been given salaries disproportionate to their qualifications and experience.
Shunglu Committee is likely to submit its report in February. Appointed in October, the committee has been given a free hand as the office order on terms of reference clearly said that Shunglu Committee would determine its own ways of functioning. It also has the powers to summon officers and government records.

Finance & Economy

After self-assessment, India goes to IMF, World Bank for health check

India has voluntarily asked the International Monetary Fund and the World Bank to conduct a comprehensive and in-depth analysis of the country's financial sector.
The scrutiny of the country's financial sector will take place under the Financial Sector Assessment Program (FSAP) established by the two multilateral lenders in 1999 after the Asian crisis.
Since the FSAP was launched, more than 130 countries have volunteered to participate in the programme, according to the IMF website.
India was among the first to undertake the pilot FSAP in 2000-01. In addition, India also undertook a comprehensive self-assessment of International Financial Standards and Codes during 2002 and undertook a review in 2005.

New manufacturing policy

The country's more than 35 million small and medium firms that accounts for roughly 45% of the country's industrial output get just 5-8% of the available institutional funding, despite the priority status accorded to them by the central bank.
More than 60 million people are employed by SMEs in the country. The sector accounts for almost 95% of the industrial units and contributes about 40 per cent of the value addition in the manufacturing sector.
The priority status means banks will have to lend a certain faction of their total advances to SMEs every year. But even this provision has failed to ensure adequate funds for the sector.
Now the government is reportedly coming out with a new manufacturing policy to help the SME sector.
The manufacturing policy that is expected to be unveiled in a month will propose an exchange that will offer an exit window for investors, steps to institutionalise factoring services to allow companies to cash their future income and easier bank guarantees to support small businesses.
The industry policy looks to create 100 million jobs in the next 15 years, bringing the share of manufacturing in the country's gross domestic product to 25% by 2022.
The policy will propose a stock exchange that will focus on finding money for SMEs. The proposed exchange would address an important piece missing in the financial markets. The entry and exit of firms will be made much easier through these exchanges.
Institutionalising of factoring services is another long-standing demand of the SMEs, which are dependent on short-term working capital loans. Factoring is the process by which receivables are sold to companies who take the responsibility of collecting those funds. Such companies would provide the companies with cash, after charging a fee.
The government is also considering stamp duty exemption for factoring services under the Factoring and Assignment of Receivables Bill 2010 that will be placed before the Union Cabinet ahead of the budget session of Parliament.

Global investors flee Street as rate hike fears loom

HDFC Bank and developer DLF led the fifth straight day of declines in equities as global investors fret over the potential increase in interest rates by the central bank to tame price rise.
With global commodity and crude oil prices rising on revival of demand in the US, analysts believe that Indian companies' earnings would be hit due to high input costs.
The benchmark Sensex fell 2.4% to 19,224.12 and the S&P CNX Nifty shed 142 points. The benchmarks are off 8.5% since their peaks last November. All sectoral indices on BSE fell. An average of 3.4 shares declined for every share that rose. As many as 28 of the 30 Sensex components fell.
The Sensex is now at a one-month low after the second biggest fall this year.

ET in the classroom on some of the functions overseen by RBI

This is a good column that explains us about concepts like oversight by RBI, ECS, NEFT, RTGS etc. Good read.

Sport

The IPL auctions

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

International

China's trade surplus dips for 2nd year

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

Language Lessons

natty: Adjective

Marked by up-to-dateness in dress and manners
Adverb: nattily -- In a natty manner; with smartness

go out on a limb: idiom

Put oneself in an isolated or disadvantaged position in one's support of someone or something.

Current Affairs January 10th 2011

2011-01-11T21:05:00.001+05:30

January 10^th 2011

Finance & Economy

What is predatory pricing? Why is it difficult to prove predatory pricing?

Predatory pricing refers to a situation where a firm charges a price below its cost of production, with the intent of forcing its competition to either immediately exit the market, or to exit the market after facing losses for a while. Once the competition exits the market, the predatory firm raises prices.
There are three main reasons why it is difficult to prove that a firm is engaged in predatory pricing.
The first is determining whether a firm is charging prices that are below average variable costs. A rational firm will not stay in business when the price for its product is below its average variable cost, unless it has some intent other than current loss minimisation. The Areeda-Turner test is employed by the US courts to determine whether or not there is any predatory intent. According to this test, a price below the shortrun marginal cost should be unlawful.
The second is proving intent. Firms can reduce prices because costs have fallen; hence, it is difficult to prove that a firm reduced prices with predatory intent.
The third is the rationale for predatory pricing. The rationale is that the predatory firm manages to force competitors out from the market, and after their exits, raises prices above the competitive level.

Companies will have to report resettlement misses

Companies will be asked to extend proper rehabilitation and resettlement packages for people displaced by their operations, failing which they will have to report reasons in their annual statements.
This proposal forms part of the corporate ethics guidelines being prepared by the corporate affairs ministry. Companies will also be asked to maintain ecological diversity in areas where they operate and report project-wise work done in this regard.
While the new guidelines will be kept voluntary, companies will have to explain reasons for their non-compliance, hence creating an indirect sanction. The government has adopted the strategy of "apply or explain", which effectively means any non-conformity with the norms will have to be reported with reasons. These details will form part of the business responsibility statement, accompanying the company's annual report.
The government has been concerned over the way corporates have been exploiting the riches of the country's tribal belt, with many key projects hitting the regulatory wall for flouting norms.

International

On how developed countries got away with more benefits in climate change negotiations

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

Language Lessons

pyrotechnics: Noun

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

Current Affairs January 7th 2011

2011-01-11T20:31:00.001+05:30

January 7^th 2011

Politics & the Nation

Create Telangana says our favourite paper

Look at this editorial that pleads for the formation of Telangana on economic footing.

An excellent critique of the proposed Lok Pal bill

In the context of the country witnessing scams all around in every sphere, the institution of Lok Pal has again got some attention. Here is an excellent critique of the proposed bill by Justice Rajindar Sachar former Chief Justice of the Delhi High Court.

Telangana panel roots for united AP

The Srikrishna panel has suggested six routes to settle the dispute over Telangana but found a "united Andhra Pradesh", with an economically and politically empowered Telangana region, as the "most workable option".
"This can be done through the establishment of a statutory Telangana Regional Council with adequate transfer of funds, functions and functionaries. The regional council would provide a legislative consultative mechanism for the subjects to be dealt with by the council," said the report placed by Union Home Minister P Chidambaram before a meeting of political parties from Andhra Pradesh here on Thursday.
The suggests that Telangana Regional Council be allowed to exclusively deal with subjects such as planning and economic development, water and irrigation, education and skill development, local administration and public health.
Recommending the bifurcation of Andhra's boundaries into Telangana and Seemandhra, with a new capital for the latter, as the "second best option", the panel insisted that the option may be exercised only if "unavoidable and if this decision can be reached amicably amongst all the three regions".

Finance & Economy

NREGA wages to be linked to inflation

The government will link wages under the employment guarantee act to inflation risking higher food inflation, but resisted the demand to bring them on par with minimum wages.
Minimum wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) will rise between 17% and 30% from the current Rs. 100 a day with effect from January 1. The new rate will come into effect from January 1 this year and will require an additional Rs. 3,500 crore spend in the current year itself.
The decision to link NREGA wages to inflation is a half-way solution to the demands of social activists that the scheme guarantee at least the minimum wages.
Sonia Gandhi had backed the demand to align NREGA payments with minimum wages. But the government had admitted its inability to meet the demand as states could then revise the minimum wages sharply knowing that the Centre will be legally bound to pay.
It had, instead, set up an expert committee under Planning Commission member Pranob Sen to suggest an appropriate indexing of NREGA wages. The government said it will consider its recommendations once submitted.

India to grow 8.8%, but inflation a concern: IMF

The International Monetary Fund (IMF) expects Indian economy to grow by 8.8% during the current financial year, up from 7.4% a year ago, mainly driven by robust growth in farm sector and pick up in consumption.
It had, however, expressed concern over rising prices and underlined the need for controlling inflationary expectations by more monetary actions by the Reserve Bank.

Price fighters in a tizzy as food inflation hits 18.3%

Food inflation rose to 18.3% for the week ended December 25, its highest level in 23 weeks, even as key policymakers in charge of fighting price rise threw their hands up in despair.
The untimely spurt in prices is being attributed to a supply shock, whose effect on retail prices is seen as disproportionate. Food inflation stood at 14.4% in the previous week.
The government's efforts to tackle food inflation, which has been in double digits since June 2009 except for a three-week period in November, have not yielded much result so far.

Schlumberger drills India's first shale gas well for ONGC

American oilfield service provider Schlumberger has executed state-owned Oil and Natural Gas Corporation's (ONGC) contract to drill India's first shale gas well in the Damodar Valley. The Houston-based company's Asian arm drilled the well and is expected to submit its report to ONGC this month. Schlumberger will drill three more wells subsequently to establish possibilities of producing shale gas in India.
Shale gas accounts for 21% of US' total gas production. Now India is also exploring possibilities to produce shale gas and ONGC is investing 120 crore for the pilot project underway in West Bengal and Jharkhand. With growing demand for energy, companies are looking at shale gas, which is natural gas present within shale formations.
India is yet to conduct comprehensive studies to evaluate shale gas prospects. However, experts believe that the country has more shale gas reserves compared with conventional gas.

International

Take a look at how the Irish baliout works

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

Language Lessons

commiserate: Verb

To feel or express sympathy or compassion

zombie: Noun

A dead body that has been brought back to life by a supernatural force; (voodooism) a spirit or supernatural force that reanimates a dead body; Someone who acts or responds in a mechanical or apathetic way

effrontery: Noun

Audacious (even arrogant) behaviour that you have no right to

demagogue: Noun

A political leader who seeks support by appealing to popular passions and prejudices

Current Affairs January 6th 2011

2011-01-11T20:20:00.001+05:30

January 6^th 2011

Politics & the Nation

What is the cause of rise of religious extremism in Pakistan? (aka Islamization of Pakistan's polity)

What has aided the spread of such extremism, apart from the security establishment having used extremist/ terror groups as instruments of state policy, is the Islamisation the Zia-era laws sought to bring about.
Another reasons is the wider failure of Pakistan's secular political parties to foster an agenda of progressive, inclusive democracy and development. Given the failures of the state, the religious parties have found the space to mutate the anger of the disempowered masses into disaffection articulated along religious lines.

Srikrishna Committee report made public

The Government of India had made public the report of the committee that looked into issue of Telangana formation.
You can download the full report from here.

Finance & Economy

An excellent critique of the Jalan committee recommendations

This committee has been in the news of late for the recommendations it made on reforming the market infrastructure institutions. The recommendations have attracted both negative and positive support. Take a look at this very excellent critique that appeared in today's op-ed. Worth a read.

The retail potential in India

The country's private, retail spending, estimated at about $530 billion today, is poised to cross $1 trillion (at current prices) by 2020. Of this, modern retail (domestic and potentially international too) will not touch even $200 billion by then, leaving an $800 billion or more opportunity for the traditional, small, independent retail.
Indeed, just to keep pace with an 8% GDP growth rate-induced increase in private consumption, the country will need an additional 650 million sq ft of retail space by 2015, and about 800 million sq ft more between 2016 and 2020.
In absence of a clear real estate policy for the retail sector, it is unlikely that such space will come up.

The benefits of excise and service tax integration

In a very interesting article Pratik Jain lists the advantages. Let's take a look:
If there is a common legislation for levying tax on manufacture of goods and supply of services, hopefully, the underlying input tax credit rules would also be common and simplified. This would also give the businesses flexibility to transfer their surplus credits from a particular manufacturing location to another manufacturing location and also to a service unit, or vice versa.
The other major advantage of this integration would be simplified compliances for taxpayers.
A unified regime would not only conserve time and money of the taxpayer, but it would also offer her the flexibility to streamline or automate the underlying business and IT processes for handling these taxes.
The integration would also provide an opportunity for the government to align the administration of these legislations by having common personnel for processing the applications, audit and appeal proceedings and so on. It would also reduce the number of legislations by at least one, which would again be a welcome change.

On subsidizing fuels

Look at this ET in the Classroom column on the subject. Very educative.

Are we feeding on our future generations?

This graphic discusses the question very beautifully.

Language Lessons

dastardly: Adjective

Despicably cowardly
eg: The killing of a liberal politician arguing against the country's repressive blasphemy laws is dastardly enough in itself.

antidiluvian: Adjective

Of or relating to the period before the biblical flood; So extremely old as seeming to belong to an earlier period
eg: Time and again, quixotic ideology has led to meaningless debates, antediluvian policy and inexplicable strangulation of capacity buildup in both physical and social infrastructure.

Current Affairs January 5th 2011

2011-01-06T09:56:00.001+05:30

January 5^th 2011

Politics & the Nation

Should there be another investigation into Bofors issue because of the ITAT order?

Take a look at this well-reasoned editorial that argues against the demand raised by the BJP / NDA. While not condoning the wrongs that made up the Bofors scandal, it argues that it is a waste of time and precious resources to seek another probe again into the issue.

Bodyguard kills Pak Punjab Governor

Salman Taseer, the governor of Pakistan's wealthiest and the most populous province, was shot dead in Islamabad on Tuesday by one of his own guards, who later told interrogators that he was angry about the politician's stance against the country's blasphemy law.
The killing was the most high-profile assassination of a political figure in Pakistan since former prime minister Benazir Bhutto was assassinated in December 2007, and it rattled a country already dealing with crises ranging from a potential collapse of the government to a virulent Islamist insurgency. The killing could also add to concerns about inroads by Islamist extremists and fundamentalists into Pakistan's security establishment and represented another blow to the country's Pakistan's embattled secular movement.
Pakistan's blasphemy law has come under greater scrutiny in recent weeks after a Christian woman, Asia Bibi, was sentenced to death for allegedly insulting Islam's Prophet Muhammad. The law effectively orders death for anyone convicted of insulting Islam. Taseer had said Bibi should be granted a pardon, a stance that earned him opprobrium from Islamist groups across the country as well as threats.
Dozens of Pakistanis are sentenced to death each year under the blasphemy law, which dates back to the 1980s military rule of General Mohammad Zia ul-Haq. Most cases are thrown out by higher courts and no executions have been carried out, but human rights activists have long complained that the law is used to settle rivalries and persecute religious minorities.

Finance & Economy

Are lobbyists good for the nation?

Former Chairman of SEBI, Mr. G.V. Ramakrishna writes on the subject in an op-ed today. Makes a good reading. Some excerpts:
In the US, lobbyists would collect data, analyse the implications of particular laws for various groups, promote articles and research papers and suggest the line of action that would promote their interests. Similarly, the position of opposing groups gets developed and presented to the legislators. Gradually, this healthy activity spread to socialising by parties, holidays and expensive gifts to important members of the various committees. Cash gifts and election funding also came along as a normal activity of lobbyists.
In India, the system of lobbyists is not a recognised activity and has acquired an odour of bribery of legislators, officials and the media.
The main problem is that the activity of lobbyists is carried out clandestinely. The interests of different companies or groups are rarely based on research or discussion among disinterested groups.
The real criticism about the lobbyists can be summarised as follows: They are mostly individuals. They work behind the scenes. They do not reveal the companies or groups of companies they represent. They do not present any researched papers except through the media without owning their positions openly. The object of lobbying may be policy changes or individual cases. They try to change policy through the ministers or through their advisers.
What can be done to make lobbying more transparent?

In a sense, the lobbyists should act as advocates that present different views and interpretation to enable the government to take an informed decision.
Rules for lobbyists should be formulated for both individuals and companies to be registered with the ministry of company affairs with sufficient details of the companies or groups of companies they represent.
The representations they make should be to the minister or the secretaries and it should be in writing and made available on the website of the lobbyist.
The contacts with the minister or secretary should not be in private but in the offices.
Lobbyists should represent not individual companies but industry groups where large industry associations have divided interests and cannot take separate views to represent groups.

Language Lessons

annus horribilis

Annus horribilis is a Latin phrase meaning "horrible year". It alludes to annus mirabilis meaning "year of wonders".

ceteris paribus: Adjective

All other things being equal

Current Affairs January 4th 2011

2011-01-06T09:54:00.001+05:30

January 4^th 2011

Politics & the Nation

The year that was...

Take a look at this op-ed written by Kiran Karnik. It takes a good dig at us all collectively, especially the political system. A very interesting and scathing criticism of what we are. A must read.

Is Manmohan Singh guilty?

This question is popping up in discussions nowadays with unfailing regularity.
The guns are now being trained on Mr. Manmohan Singh himself for failing to act against Raja. Excerpts from an op-ed that are worth our attention:
We are repeatedly told by spokespersons of the country's ruling party that Manmohan Singh's integrity is above question. It is obviously not Manmohan Singh's individual integrity that is being questioned, but his professional functioning as the Prime Minister! If the PM takes a solemn oath to preserve, protect and defend the Constitution, his failure to act against a telecom minister who was perpetrating a major scam is a gross dereliction of duty!
The PM's prolonged failure to act is being attributed to realpolitik and coalition dharma by not just ruling party spokespersons but by the Nobel economics laureate Amartya Sen. When a soldier steps forward to defend the country, there are no guarantees even for his life. So, why should the nation's leader — who takes the final decision on whether soldiers should fight a war — hesitate to crack down on a major scam merely because it could affect the stability of the coalition he is heading?
Very uncomfortable questions eh?

Bofors is resurrected by ITAT

The ghost of Bofors scandal seems to be mustering for yet another onslaught on the Manmohan Singh government with the Income Tax Appellate Tribunal (ITAT) naming Italian middleman Ottavio Quattrocchi as one of the beneficiaries of the kickbacks.
According to an ITAT order dated December 31, 2010, "payments were made illegally as the government of India's policy did not allow middleman in defence deals". Quattrocchi and Win Chadha are accused of receiving 41 crore in illegal kickbacks in the Bofors gun purchase scandal of the mid-1980s.
Take a look at the Bofors chronology of events here.

Finance & Economy

Special scheme for SSIs planned to offset duty

The government is likely to introduce a composition scheme for excise duty on SSIs in the forthcoming budget. Under the proposed composition scheme, a small scale manufacturer would be required to pay a much lower rate of duty (as low as 1% of the turnover) than the prevailing 12% Cenvat rate with a minimal compliance burden.
Currently, small scale industries with an annual turnover of up to Rs. 1.5 crore are exempt from excise duty. But the GST proposes to bring down the exemption threshold for the levy of tax to Rs. 10 lakh.
A manufacturing unit opting for the composition scheme will not be required to maintain records, but it will not get the facility of input tax credit.
Experts say such a scheme will make the transition to GST easier.
States have demanded that the Centre continue with the turnover threshold of Rs. 1.5 crore for its component in GST, but the Centre has been firm on keeping it common for both Central and state GST at Rs. 10 lakh.

Manufacturing growth slows to 3-month low

India's manufacturing sector expanded at a slower pace in December than in the previous month, indicating that growth may have peaked in October.
Purchasing managers' index (PMI), compiled by HSBC Holdings and Markit Economics, dropped to 56.7 in December from 58.4 in November.
PMI is a survey-based compilation of manufacturing sentiment in 500 companies, and is considered a leading indicator of factory output.
An index level above 50 indicates expansion, and higher the index above that threshold greater the growth. A reading of less than 50 indicates a contraction in manufacturing.
Driven by manufacturing, industrial growth rose to 10.4% in October from 4.4% in September. But advance indicators seems to give a mixed signal for November.

Get set to fork out more for glassful of milk

India, home to the largest cattle population in the world, is facing the prospect of becoming dependent on milk imports with millions armed with new purchasing power joining the legion of milk drinkers.
In 2009-10, NDDB had imported 30,000 tonnes of skimmed milk powder and 15,000 tonnes of butter oil to meet shortages, against the backdrop of rising milk prices.
To meet the projected national demand of 180 million tonne by 2021-22, annual production has to be jacked up from the current 112 million tonne.
India needs to boost productivity of its more than 280 million milch cattle from a lowly 1 kilo a day to bridge the current demand-supply gap of over 4%, which translates to around 3.5 million tonnes a year. Top milk-producing countries have a productivity level of 25kg/day per milch animal.
According to official data, milk production in India has been growing at a rate of 3.2 million tonnes annually in the last 15 years. Even this growth has been grossly uneven, with lower growth in key producer states such as UP, MP, Rajasthan, Punjab and Haryana.
More than 90% of the milk output in the country is produced in rural areas.
The Centre's recently formulated Rs. 1,73,000-crore National Dairy Plan seeks to boost cattle productivity to 65% by 2021-22.

Unanswered questions in the Citibank fraud case

Take a look at this graphic which while throwing us light on the details of the scam points to some relevant unanswered questions.

Do you know anything about takeout financing?

Know all about it in today's ET in the classroom column. Good one.

International

On social impact investing and their stock exchange

Two men -- Pradeep Jethi and Mark Campanale -- are on a mission to promote social impact investing on a grand scale.
The duo has promoted the Social Stock Exchange in London and hopes to take it live by 2012. It is a full-fledged commercial bourse like any other, except its doors will be open only to companies that value `larger social impact' above own profitability.
Impact investing—an emerging philosophy—uses philanthropic and risk capital and private sector expertise to solve the world's biggest social and environmental challenges. Studies by firms like PricewaterhouseCoopers and the Monitor Group estimate the size of impact investing to grow from $50 billion now to $500 billion this decade. Large philanthropic institutions like the Rockefeller Foundation are exploring impact investing as an alternative to conventional `giving'. In India too, wealthy entrepreneurs like Shiv Nadar are reportedly exploring the possibilities of starting social impact investment funds.
If their efforts click, the new exchange could do to social businesses what Nasdaq did to technology companies. Nasdaq helped hundreds of technology firms attract mainstream commercial risk capital. The Social Stock Exchange could help social entrepreneurs attract both commercial risk capital and philanthropic dollars that are now seeking out `impact investment' opportunities.
A social stock exchange could be the pipe linking billions of dollars of philanthropic capital with hundreds of social entrepreneurs who are working towards sustainable solutions for the world's problems.
This is likely to be the first such bourse in the world. Brazil and South Africa have `investment exchanges' in which social enterprises are listed with a view to attracting investments. But neither enable trading in shares of such companies; the Social Stock Exchange will be the first that will. The only difference is that besides reporting financial performance, companies listing on this exchange will have to do a social audit and report some key indicators of social performance.
A recent JPMorgan report said impact investing will increase to $400 billion to $1 trillion in the next decade for just three segments of the market and create a potential profit opportunity between $183 billion and $667 billion.
Globally, investors are yet to warm up to the idea of a social exchange. The Brazilian Social and Environmental Stock Exchange launched in 2003 has facilitated investments of $5.5 million in 71 organisations as of 2008.

Facebook is valued at $50 bn

Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion, according to people involved in the transaction. The deal makes Facebook now worth more than companies like eBay, Yahoo and Time Warner.
The stake by Goldman Sachs, considered one of Wall Street's savviest investors, signals the increasing might of Facebook, which has already been bearing down on giants like Google. The new money will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions – all without being a publicly traded company. The investment may also allow earlier shareholders, including Facebook employees, to cash out at least some of their stakes.

Language Lessons

canoodle: Verb

Fondle or pet affectionately
eg: But there are these increasingly everyday instances like, say, the case of an actress announcing the end of her marriage after being seen canoodling a retired star cricketer, and then …

hogwash: Noun

(informal) statements or beliefs that are untrue or make no sense

dreg(s): Noun

Sediment that has settled at the bottom of a liquid; A small amount of residue
eg: Like the last dregs of stale coffee, the old year leaves a bitter aftertaste, …

cavil: Noun

An evasion of the point of an argument by raising irrelevant distinctions or objections;
Verb: Raise trivial objections

Current Affairs January 3rd 2011

2011-01-06T09:53:00.001+05:30

January 3^rd 2011

Politics & the Nation

An excerpt from an ET editorial about the havoc that can be wreaked by corruption

Corruption today is not just a peripheral concern for moralists, but a major obstacle to India's progress, something that should concern every realist as well. Corruption jacks up the cost of land, making hospitals and schools expensive, turning healthcare and education prohibitive for the majority. Corruption scuppers vital projects, delays them, alters masterplans and route alignments, drains the exchequer and makes the government underperform and underdeliver. It makes fools out of honest men, heroes out of crooks and rewards dishonest officials. Corruption turns a blind eye to RDX being smuggled in, forex being smuggled out. It excoriates faith in the system and prepares the ground for extremist ideologies.

Telangana state: Is there an economic rationale?

Take a look at this well written article that shows that there is no economic rationale for the formation of Telangana state. Authored by a non-AP person and a Professor at the reputed ISB, Hyderabad, it makes a very good reading. The accompanying table is a must see.

Finance & Economy

Infrastructure debt funds to roll out soon

Take a look at this graphic on the subject. Interesting.

What was the Jalan committee constituted for?

To review the ownership and governance of market infrastructure institutions.

What is a benami transaction and why are benami transactions bad for the country's economy?

As the word 'benami' suggests, it means not in own name. It is commonly used to denote a transaction, which is done by a person without using his own name but in the name of another. The benamidar has no beneficial interest in the property or business that stands in his name; he represents, in fact, the real owner and so far as their relative legal position is concerned, he is a mere trustee of the real owner.
The question whether a particular deal is benami or not is essentially a question of fact. The courts in deciding the issue are usually guided by the circumstances as to: (a) the source from which the investment came; (b) the nature and possession of the property after acquisition; (c) motive, if any, for giving the transaction a benami colour; (d) the position of the parties and their relationship, if any; (e) the custody of the title deeds; and (f) the conduct of the parties in dealing with the property. These are illustrative instances, not exhaustive. The burden of showing that a transfer is benami is upon the person, who alleges benami, i.e., if the government wants to say that a transaction is benami, it will have to prove it.
The adverse impact of benami transactions on the country's economy is large. It bifurcates income earning activities into fragments leading to loss of tax revenue. These have been resorted to commit frauds and cheating. These lead to substantial litigation, where the burden of proving benami is on the government, but it does not get discharged substantially because the facts are in the knowledge of respective parties.

Sudhir Chandra takes over as chairman of CBDT

This 1973-batch Indian Revenue Service officer, has taken over as the new chairman of the Central Board of Direct Taxes (CBDT). He handled the investigation portfolio in the board when the income-tax department took up several politically-sensitive cases, including that of raid on Madhu Koda. He replaces S S N Moorthy who is joining the Securities Apellate Tribunal. Mr Chandra will have one-year term as CBDT chairman.

Some interesting stats on steel consumption in India

The current per capita steel consumption is 50 kg for India, which is far short of countries like South Korea (936 kg), Japan (419 kg), China (405 kg) and world average (179 kg). An increase of 10 kg in per capita consumption would require an increase in output by 12 million metric tonnes per annum (mmtpa). This highlights the massive growth needed to raise domestic steel production to nearly 220 mmtpa by 2020. This is also the reason why major foreign players have been attracted to the country.

Govt plans to exempt factoring services from stamp duty, to introduce bill soon

The government plans to offer stamp duty exemption for sale of accounts receivables, allowing businesses to encash sales made on credit and ensure a healthy cash flow.
The finance ministry will facilitate this change by moving a new bill to regulate factoring business and to amend the Stamp Act, 1899. The Factoring and Assignment of Receivables Bill 2010 will be placed before the Union Cabinet ahead of the budget session of Parliament that begins in February.
Stamp duty exemption will allow companies to get their bills discounted easily by banks or other entities that provide factoring services, which buy accounts receivables at a discount.
As of now only banks are exempt from paying stamp duty on receivables. Pure factoring companies have to pay the duty, which differs from state to state.
The factoring business has not made much progress in India because of a lack of a consolidated framework for the business. In 2008, the total factoring business was worth Rs. 33,228 crore, or just 1.24% of the total bank credit. Steep stamp duty on assignment of debt and lack of recourse for the buyer if the account receivable turns sour are the other factors troubling the business.

International

The problems the world faces on the way to international monetary reform

It is a given that there is need for international monetary reform. Jean Pisani-Ferry, Director of Bruegel, an international economics think tank, Professor of Economics at Université Paris-Dauphine, and a member of the French Prime Minister's Council of Economic Analysis explains the problems very well in his article on Project Syndicate. Do take a look. The gist:
The first is exchange-rate relationships. The current practice of some countries pegging their currency's value to that of the dollar or the euro often leads to undervaluation or overvaluation.
The second problem is imposing discipline on national policies in order to preempt the temptation to export domestic inflation or unemployment. Under the gold standard, discipline was automatic. With floating exchange rates, it is not.
The third problem concerns international liquidity. Financial flows are excessively volatile. Emerging countries are inundated with capital inflows one day, and faced with abrupt and equally destabilizing outflows the next.
The fourth problem is collective anchoring. Naturally, the major central banks are concerned with the inflation that they can control – homemade inflation. But this neglects global inflation driven by rising commodity prices, which has been increasingly evident.

Language Lessons

mordant: Adjective

Harshly ironic or sinister; Of a substance, especially a strong acid; capable of destroying or eating away by chemical action
Noun: A substance used to treat leather or other materials before dyeing; aids in dyeing process
eg: Similarly, Wodehousian flippancy, so enjoyable in the privacy of your home or club and in the company of fellow eggs and beans, is out of place when aired in public, no matter how mordant the wit or how innocent the intent.

husbandry: Noun

The practice of cultivating the land or raising stock

sybaritic: Adjective

Displaying luxury and furnishing gratification to the senses

pro bono: Adjective

Done for the public good without compensation

Current Affairs April 22nd 2010

2011-01-04T13:10:00.001+05:30

April 22^nd 2010

Politics & the Nation

What is it that the IT raids on IPL and its franchisees are focusing on?

It is all widely known to us all that the IT Department is on the trails of IPL and its franchisees. What exactly could the IPL and its franchisees have done wrong? What is it that the IT Department can hope to find through these raids? Let's look at some excerpts from today's lead stories to get an inkling:
The immediate reason for the survey in Mumbai is to obtain details of a socalled facilitation fee of $80 million connected to the restructuring of the telecast arrangements for the second edition of the IPL held in South Africa.
A report in The Times of India suggested that the $80 million fee was negotiated by Mr Modi without the consent of the governing council of the IPL. The amount was siphoned off to a middleman, the report had suggested.
Under income-tax rules, tax is required to be deducted before making payments to overseas entities and officials had been verifying whether WSG (World Sport Group) had sought the clearance of the tax department to remit the amount.
Some tax experts say since the money was sent from a bank in Singapore, WSG is likely to claim that there was no need to deduct tax as no money was sent from India. But in the recent past, Indian I-T authorities have aggressively tried to tax such payments if it is determined that the income paid to an overseas entity is generated in India. In a number of cross-border tax claims made by Indian tax authorities over the past three years, including the famous multi-billion-dollar tax claim on Vodafone, the nub of the income-tax department case is that the country has a right to claim tax on income generated in India, irrespective of the location where the transaction took place.
Some background information on IPL broadcast deal: In January 2008, WSG and MSM had bought the rights of the IPL for 10 years at a cost of $918 million and an additional $108 million for promoting the event. But a year later, BCCI/IPL served a termination notice to MSM to end its broadcast rights, accusing it of breaching the original contract on several counts. This had resulted in a bitter legal wrangle between MSM and BCCI. In March 2009, just before the IPL moved to South Africa, the deal was renegotiated and BCCI managed to sell the broadcast rights to MSM and WSG for $1.63 billion (Rs 8,200 crore) for nine years. This was the biggest-ever deal in Indian sports history, and is valid till 2017.
A little info on WSG: World Sport Group, a Singapore-based sports marketing, event management and media company, buys sponsorship, marketing, television, digital, team and athlete rights from sporting entities. It in turn sells them to corporates. WSG deals with cricket, football and golf events across Asia. It manages close to 600 days of sports events annually. Apart from BCCI and IPL, WSG works with the Indian Golf Union, Asian Football Confederation, the South Asian Football Federation (SAAF), West Asian Football Federation (WAFF) and Singapore Sports Council. It is headquartered in Singapore.

Power tussle in Mumbai

There is a big battle going on between Tata Power Company and Reliance Infrastructure in Mumbai over power supply and generation. The issue is quite complicated and is not amenable to be told in a few sentences. One should read this news story to comprehend it in full. Take a look.

An excellent editorial comment on the current Gujjar agitation

The current march on Jaipur by members of the Gujjar community came after their demand to freeze government hiring while the reservation issue was sorted out. The whole mess represents the race among social groups to reach the bottom of the pyramid in an attempt to get a share of the reservation pie. A clear consequence of the malaise of political parties envisaging the electorate as competing caste groups.
...In the quota-based patronage system, the Gujjars feel they are losing out. And the agitation is a reminder of the violence that attends on this socio-political process. Some make-shift reprieve may yet be found, but the whole situation posits the need to break the paradigm of competitive identity politics.

Finance & Economy

What are MSS bonds?

We have noted this earlier also. But a recap will not be a waste of effort.
When the central bank purchases dollars, it injects fresh liquidity into the system. To prevent such a flood of rupees created as a result of dollar purchases from pushing up the money supply above the desired level, the RBI then absorbs the rupees by selling government bonds. The bonds used for this purpose are the so-called Market Stabilisation Scheme (MSS) bonds. Right now, their supply with the RBI has dwindled to some Rs 2,700 crore.

How valid is the criticism that financial super regulators will not deliver?

It has become fashionable to poohpooh the idea of unified regulation of the financial sector, citing the example of Britain's Financial Services Authority, which failed to prevent the financial meltdown after the collapse of Lehman Brothers, although it was a single, unified regulator for all banking, insurance, debt, stock and derivative markets in Britain.
This is populism, not analysis. It neglects two factors.
One, finance in Britain was and is globally integrated, whereas regulation was still mainly national and it is only now that substantive efforts are being made for global coordination in the regulation of finance, through the G20 mechanism.
Two, while structure determines what kind of functions it can sustain, it does not guarantee that function will necessarily follow.

An excellent excerpt that explains the concept of securitization and maturity transformation.

Consider a securitised mortgage. A loan is given by a bank to help someone buy a home. The bank now converts the loan into thousands of units and sells these to investors. These investors now have claim to the debt servicing carried out by the borrower. The bank gets its money back upfront and can now lend again to another home loan seeker. At the same time, a perfect maturity transformation takes place, with minimal cost. A bank has short-term, relatively speaking, deposits while its loans will be repaid over a long time. There is thus a mismatch between the maturity of its liabilities (deposits) and the maturity of its assets (loans). Using short-term deposits to finance longterm investment is maturity transformation, a key task of financial intermediation. Securitisation of loans achieves this at minimal cost. The investors who buy the securities into which the loan has been converted know that the bonds would be redeemed only after a long period — the maturity profiles of the asset and the liabilities now match.

Language Lessons

gumshoe: Noun

Someone who is a detective
eg: The gumshoes also dropped into the offices of the owners of three IPL teams—Deccan Chargers in Hyderabad, Chennai Super Kings in Chennai and Kolkata Knight Riders in Kolkata.

shenanigan: Noun

Reckless or malicious behaviour that causes discomfort or annoyance in others; The use of tricks to deceive someone (usually to extract money from them)
eg: The shenanigans surrounding the Indian Premier League (IPL) may be grabbing all the eyeballs, but away from the headlines a little noticed battle has broken out between energy companies belonging to two of India's largest business houses, the Tatas and the Anil Dhirubhai Ambani Group (ADAG).

bootylicious: Adjective

Having strong sexual appeal
eg: ...bootylicious babes ...

affray: Noun

Noisy quarrel; A noisy fight

Current Affairs April 21st 2010

2011-01-04T13:08:00.001+05:30

April 21^st 2010

Politics & the Nation

SC upholds Manu Sharma's life term

The Supreme Court on Monday upheld the conviction and life impris-onment awarded to Manu Sharma, son of senior Congress leader and former Union minister Venod Sharma, in Jessica Lall murder case. The SC also upheld the conviction as well as sentence of 4 years jail term of Vikas Yadav and Amarjeet Singh Gill for destruction of evidence.

Tamilnadu nominates AR Lakshmanan on Mullaperiyar row

Reversing its stand not to participate in the five-member empowered committee constituted by Supreme Court to resolve the long pending dispute on the Mullaperiyar dam with Kerala, Tamil Nadu government on Wednesday nominated former Judge of Supreme Court Justice A. R. Lakshmanan in the committee.
The Supreme Court, while hearing petitions by Tamil Nadu and Kerala governments on the dam issue, had constituted a committee headed by Justice A. S. Anand, former Chief Justice of the Supreme Court, to resolve the dispute.
The committee consisted of two representatives of the Centre, one each from Tamil Nadu and Kerala besides Justice Anand.
Kerala government has already nominated Justice K. T. Thomas, former Supreme Court Judge, as its nominee.

Finance & Economy

Monetary policy review by RBI

The RBI raised the two key policy rates—reverse repo and repo—by 25 basis points each, and left banks with Rs 12,500 crore less to lend with a 25 bps increase in the cash reserve ratio (CRR).
This rate hike is seen as moderate by any standard in the current circumstances. Therefore, most bankers think RBI will have to raise rates as well as increase the CRR in small doses during the year.
Banks borrow from RBI at the repo rate while parking (or lending) surplus funds at the reverse repo rate. After Tuesday's rate action, the repo and reverse repo rates are 5.25% and 3.75%, respectively. The CRR, which is like a tax on lenders, is the slice of customer deposit that banks have to set aside as cash with RBI. After the 25 bps CRR hike, from 5.75% to 6%, banks will have Rs 12,500 crore less to lend from the fortnight beginning April 24.
RBI began tightening in January when it raised the CRR by 50 bps in two stages. This was followed by the 25 bps increase in repo and reverse repo in March. While RBI has been slower than its counterparts in Australia and Israel in raising rates, it has been quicker in reversing the cycle than the Chinese central bank and monetary authorities in many advanced economies.

What are the extant rules governing sweat equity?

Is the current regime good or bad? And why?
Take a look at this ET editorial on the subject. Well worth a read. Makes a strong case for not just retaining sweat equity; it even calls for a further liberalization.

Is there a caste basis for Indian socialism?

SSA Aiyar emphatically argues and proves that there in fact is. To understand the whole concept a read of his op-ed piece is a must. But an excerpt worth our attention to get a quick peek:
Nehru and Co felt that Indian Brahmin-intellectuals were superior to whites, but also that Indian marwaris and banias were inferior. Their superiority complex on the moral and intellectual plane co-existed with a deep inferiority complex on the business plane. Their solution was to go for central planning. This approach assumed that benevolent planners knew better than producers or consumers what should be produced or consumed. The licence-permit raj asserted that people were best off when they had no power at all to decide what should be produced or consumed — that was best left to the rulers!

International

Zardari signs bill to clip own wings

Pakistan President Asif Ali Zardari on Monday signed a historic bill seeking amendment in the country's constitution to strip off the sweeping presidential power and strengthen parliamentary democracy.
The 18th Constitutional Amendment Bill was signed at a ceremony attended by Prime Minister Yousaf Raza Gilani, his cabinet members, opposition PML-N Chief Nawaz Sharif and others.
The new law will cut some of the major powers of the President such as appointing the chiefs of the country's three armed forces, dissolving parliament and dismissing a democratically elected government.
The amendment will repeal changes made to the constitution by former military rulers Zia-ul-Haq and Pervez Musharraf to strengthen their power.

Language Lessons

pidgin: Noun

An artificial language used for trade between speakers of different languages
eg: ...It has been so since the time he air-dropped himself on to the constituency, and led a typhoon-like campaign that sidelined long-time party workers, relied on electronic campaign ideas and charmed himself into the hearts of youth and women with his flowing hair, pidgin Malayalam and a man-in-a-hurry image.

abashed

Adjective: Feeling or caused to feel uneasy and self-conscious
Verb: Cause to be embarrassed; cause to feel self-conscious
eg: Most state police forces would be abashed if there were seven crude bombs found just outside the gates of a cricket stadium where a high-visibility Indian Premier League (IPL) match was being played.

Current Affairs April 19th 2010

2011-01-04T13:06:00.000+05:30

April 19^th 2010

Politics & the Nation

Tharoor gone; Modi is not sitting pretty either

As expected Mr. Shashi Tharoor was asked to put in his papers and he promptly resigned over the IPL row.
The noose around Mr. Modi appears to be fast tightening with the government -- especially the IT Department -- revealing lot of muck about him ranging from his manipulation of land deals in Rajasthan and the existence of a maze of shell companies and offshore entities used to route payments and equity stakes worth hundreds of crores of rupees. The IT Department's report also makes the startling allegation that Mr Modi—through his associates—was 'involved' in 'betting', while "insider information and outcome fixing of IPL matches were hinted at".
More on this in today's headlines.
Here is a very good political comment about Mr. Tharoor. Worth a read.
Want to know more on this sordid saga? Look at page 4 of the ET Mumbai edition.

CK Prahlad is no more

Even as we were taking a Sunday break, came the news that this Management Guru is no more and that he died of an illness of the lungs in the US.
He was 68.
Take a look at this obituary penned by none other than Kumar Manglam Birla on this great management thinker.
More on this on page 8 of the ET Mumbai edition. Recommend a read.

Finance & Economy

On the challenges that a typical central banker faces:

Monetary policy is a notoriously imprecise tool. Moreover, it acts with a long time lag, especially in the Indian scenario where financial markets are fragmented; we still have administered interest rates in some sectors and interest rates on government debt, that sets the floor for all other borrowing, is not exactly freely-determined by market forces.
A very good graphic that discusses the RBI's monetary policy review due tomorrow.

Irda tells postal dept to fall in line, triggers row

The insurance regulator has demanded that the country's postal department adhere to its norms while selling insurance products, triggering a potentially damaging row between the two and forcing the finance ministry's intervention.
The postal life insurance has over 15 million policy holders. It offers two life insurance schemes, Postal Life Insurance and Rural Postal life Insurance with a corpus fund of Rs 14,000 crore and Rs 4,000 crore, respectively as on March 2009. All insurance products offered by the DoP are not covered by IRDA's rules and regulations.
Under the Insurance Act 1938, Section 118 (C), life insurance schemes run by several state governments for their employees and the Postal Life Insurance Scheme of the central government don't come under the IRDA purview. The insurance regulator is looking to extend its reach.

Quantitative restrictions on imports may be back

India had to remove QRs on over 700 items in 2001 after it lost a case in WTO against the US which had challenged these restrictions on import of large number of industrial and agricultural items.
Under the QR mechanism, a country can impose a restriction on imports up to a limit on items which are sensitive to its domestic industries. For availing this facility, the country is required to have an enabling domestic law.
Now, the country proposes to make good this lacuna by bringing changes in the domestic law enabling it to protect its industries against import surges. The Standing Committee of Parliament has more or less approved a provision in a bill to amend the Foreign Trade (Development and Regulation) Act.

HDFC Bank edges out ICICI as India's top pvt retail bank

HDFC Bank, the country's second-largest private bank, has moved to the top of the pile in the retail banking segment, displacing ICICI Bank as the recovery in demand and robust economic growth helped the bank to lend more to customers buying cars, homes and two-wheelers.
How did this come about?
Part of the reason for the surge in retail lending could be because of increasing consumer confidence and rising wages.
Retail banking brings in close to 70% of the revenues for HDFC Bank and constitutes 55% of the asset book. The retail and corporate banking business contributes equally to the profits of the bank.
After 2008-09, ICICI Bank, which was seen as the aggressive face of retail lending in India, changed track and started shrinking its retail loan book. The bank is now focusing only on secured loans having cut down on its loan exposure to unsecured loans. The bank has also pruned its credit cards from a peak of 8.5 million to close to 5 million now. At its peak, ICICI Bank used to disburse over Rs 1,200 crore in auto loans compared with HDFC Bank's Rs 500 crore.

International

What exactly is the charge against Goldman Sachs in the SEC prosecution?

The SEC said that in early 2007, as the US housing market teetered, Goldman Sachs created and sold a CDO linked to subprime mortgages without disclosing that hedge fund Paulson & Co helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1.
Very complicated to understand know? In the words of Sudeshna Sen:

It's all terribly complicated, but simply, SEC says Goldman deliberately sold stuff they set up to fail, to help make profits for John Paulson's giant hedge fund, which wanted to bet against the subprime mortgage market. Paulson, who made a billion dollars when that product collapsed, and wrote a bestseller as well, is supposed to have helped pick the worst portfolio he could think of, but Goldman didn't tell unsuspecting buyers this — ABN Amro, now government-owned RBS, took the worst hit of $800 million.
It would be the same if your mutual fund manager, for instance, created a portfolio he knows is full of junk stocks, and then sells it to you while he's selling it short. Or the dealer in the casino rigs the table to benefit one player.

The firm denies any wrongdoing.
But it will be a long haul for Goldman before it can extricate itself from the current mess.
Take a look at this detailed article to know why.

A very interesting article on the problem of too big to fail

Take a look at this article by Simon Johnson. It explains the problem being posed by banks which are too big to fail.
He goes on to discuss why the current administration's efforts at handling them will not succeed. There is an element of cross-border challenge that cannot be easily handled by legislation in a single country.

Language Lessons

kerfuffle: Noun

A disorderly outburst or tumult
eg: Neither the burps of an unpronounceable volcano in Iceland nor the Kochi kerfuffle are to blame for the latest bug to hit world cricket, but the portent is equally calamitous.

Current Affairs April 17th 2010

2011-01-04T13:05:00.001+05:30

April 17^th 2010

Politics & the Nation

Tharoor appears to be in trouble; may lose his job

Shashi Tharoor, who has pushed the government into a politically embarrassing corner, may be asked to put in his papers soon. The Congress leadership appears to have concluded that the minister's continuation in the government has become untenable after it was detected that he negotiated with Rendezvous for a higher share of sweat equity for his friend Sunanda Pushkar.
According to Section 79A of the Companies Act, 1956, a company can issue "sweat equity" only a year after commencing business. The Kochi franchise was registered only on March 17, 2010.
This is not the only issue that the minister has failed to explain to the leadership. The company has also violated the restriction on the issue of sweat equity shares prescribed by the Companies Act, for showering largesse on Ms Pushkar. A company, it appears, cannot issue sweat equity shares for over 15% of the total paid-up capital in a year or shares of the value of Rs 5 crore, whichever is higher and the firm has to get prior approval of the government. The rules also say that no matter what the agreement between the company and sweat equity holder states, sweat equity cannot be cashed out in less than three years.
The SEC alleged that Goldman Sachs, led by chief executive officer Lloyd Blankfein, 55, structured and marketed CDOs that hinged on the performance of subprime mortgage-backed securities. The New York-based firm failed to disclose to investors that hedge fund Paulson & Co was betting against the CDO, known as Abacus, and influenced the selection of securities for the portfolio, the SEC said.

President Obama's policies are contributing to an arms race between India and Pakistan. Comment.

If you are asked to answer such a question, ever, then this piece by CP Bhambri in today's op-ed will form an excellent answer. Take a look.

Finance & Economy

India Inc's foreign investments down 34% in Apr-Dec '09

The government cleared 2,984 proposals worth $14.3 billion during the nine-month period between April and December 2009 for investment in joint ventures and wholly-owned arms abroad. The comparable period in 2008 had seen the clearance of 2,828 proposals worth $16.4 billion.
Although RBI did not offer any reason for the fall in investment volume, it is widely perceived that local companies are more cautious nowadays in their investment decisions and this has led to the fall. Following the global financial crisis, companies are shying away from investing in equities.

New national transport permit regime

To be effective from May 1, the salient features of this regime are:
Replaces the existing permit regime which requires goods carriers to compulsorily pay Rs 20,000 annually per truck. Now they will have to pay Rs. 15,000 for plying their vehicles in the home state and three neighbouring states.
For each additional state, the transporter has to pay Rs 5,000
No relief for customers as permit fee contributes less than 2% of the total cost
The total revenue contribution from state permits to goods carriers is estimated to be around Rs 932 crore annually

International

SEC sues Goldman Sachs for subprime-linked fraud

Goldman Sachs Group was sued by US regulators for fraud tied to collateralised debt obligations that contributed to the worst financial crisis since the Great Depression. The firm's shares tumbled as much as 16% in early trade and financial stocks slumped.
Goldman Sachs misstated and omitted key facts about a financial product tied to subprime mortgages as the US housing market was starting to falter, the Securities and Exchange Commission said in a statement on Friday. The SEC also sued Fabrice Tourre, a Goldman Sachs vice-president.

Major Economies Forum (MEF)

The MEF was set up by US President Barack Obama last year and it is focused on working towards seeking an outcome on contentious issues relating to climate change.
Technology is one area that the MEF has sought to address. In this context, it is looking for a review of the renewables and efficiency deployment initiative (Climate Redi), which was launched at the Copenhagen conference.

Letting Banks fail won't solve the problem

This is an interesting article from Paul Krugman. Worth a read in entirety. But some excerpts:
...letting banks fail – as opposed to seizing and restructuring them – is a bad idea for the same reason that it's a bad idea to stand aside while an urban office building burns. In both cases, the damage has a tendency to spread. In 1930, US officials stood aside as banks failed; the result was the Great Depression. In 2008, they stood aside as Lehman Brothers imploded; within days, credit markets had frozen and we were staring into the economic abyss. So, it's crucial to avoid disorderly bank collapses, just as it's crucial to avoid out-of-control urban fires. Since the 1930s, we've had a standard procedure for dealing with failing banks: The Federal Deposit Insurance has the right to seize a bank that's on the brink, protecting its depositors while cleaning out the stockholders. In the crisis of 2008, however, it became clear that this procedure wasn't up to dealing with complex modern financial institutions like Lehman or Citigroup.

Cinema

Film and TV Institute of India FTII

Established in 1960 by the Government of India after buying over the legendary Prabhat Studios, FTII soon became the most sought after training school in film-making and its various facets. Recently FTII turned 50. Its diploma courses in direction, cinematography, editing, sound, acting, art direction and screenplay writing can hold 174 students. The entry to this world of film academia takes place through both written exams as well as interviews.

Language Lessons

Askance: Adjective

(used especially of glances) directed to one side with or as if with doubt or suspicion or envy
Adverb: With suspicion or disapproval; With a side or oblique glance
eg: Even India has reason to look askance at Iceland, as it has brought the issue of suddenly-erupting dormant volcanoes to the fore.

fib: Verb

Tell a relatively insignificant lie
eg: Fibbing is not acceptable, even if you don't call it lying.

Current Affairs April 16th 2010

2011-01-04T13:03:00.001+05:30

April 16^th 2010

Finance & Economy

Controlling inflation; whose responsibility is it?

While combating inflation is the joint responsibility of the Centre and the states, the latter can at best play a supporting role, say, by ensuring a more efficient public distribution system. In contrast, fiscal and, to a lesser extent, monetary policy, both of which have a major role in determining the overall demand-supply balance in an economy, lie squarely in the Centre's domain.
Hence Centre has a major role in taming inflation than do states.

What makes us possessive (materialistic) about things that we like?

Research has shown that the most meaningful objects that one possesses were rarely chosen on the basis of some intrinsic, rational property, like marketplace value, cutting-edge quality, simple aesthetic pleasure or anything that an economist might describe as "use-value" or "utility." They were chosen instead for connections to something else: family or social ties, a particular episode in the narrative of the subject's life, perhaps religious faith or some other belief system affiliation. That is to say, their "meaning" tended to be a function of what the thing represented.
Confusing and philosophical? This is not about philosophy or some such abstract science. It is about marketing and branding.
If you are a marketer or brand builder, you should read this small article that dwells on the subject. Take a look.

Is the current IPL spat between Lalit Modi and Shashi Tharoor harmful for marketers?

Not even one bit, is the feeling among marketers. Take a look at this story to know why.

Trivia

On the raging IPL controversy

Here is a funny but absorbing editorial take on the controversy. Worth a read.

International

BRIC declares 2010 target for World Bank and IMF reform

With a confidence borne of their successful role as a caucus at G-20 meetings over the past year, the leaders of Brazil, Russia, India and China on Thursday demanded the commitment to reform the Bretton Woods financial institutions that the advanced economies made at Pittsburgh during the G-20 summit be completed by this year itself.

Ash clouds close most European airports stranding thousands

Ash clouds from Icelandic volcano continued to hang over European skies shutting down major airport hubs like Frankfurt, London and Paris for the second day disrupting air travel.
A volcano beneath Iceland's Eyjafjallajokull glacier began erupting on Wednesday for second time in less than a month spewing smoke and steam miles into the air.
The ash plume from the volcano is hanging between 6000 and 11,000 metres where it could suck into aircraft engines causing them to shut down. The black smoke has also reduced visibility to almost zero.

Language Lessons

panache: Noun

Distinctive and stylish elegance; A feathered plume on a helmet
eg: In the eyes of the respondents in the survey, he's obviously handled the challenges with panache.

brouhaha: Noun

Loud confused noise from many sources; A confused disturbance far greater than its cause merits
eg: It's a bit puzzling. This brouhaha about franchisees and who owns what in the IPL.

chow: Noun

Informal term for a meal

Current Affairs April 15th 2010

2011-01-01T00:21:00.001+05:30

April 15^th 2010

Politics & the Nation

Shashi Tharoor - IPL spat

At first we decided not to give importance to it and ignored any noting on it. Then, when the papers and TV channels started making a huge outcry, we had to sit up and take notice of some of the actors and incidents. But the issue, surely has now snowballed into a controversy.
It is time you read the full story. Look at it here. The allegations, counter-allegations et al. The questions and observations that deserve our attention:
Was any rule or norm of propriety broken when Kochi secured the contested franchise? Did Shashi Tharoor's intervention earn IPL or its owner, BCCI a single rupee less? If not, what is the fuss?
As a minister from Kerala, did Mr Tharoor do wrong to lobby for an IPL franchise for Kerala? Catch any Malayali voter saying that. But should Tharoor have pitched, even if lawfully, for a consortium that grants sweat equity to a friend? That surely constitutes impropriety, if not a sacking offence. It's high time we purged BCCI and other sporting bodies of both politicians and sleaze.

Trouble with Nano

The Rs 1 lakh car, which drew huge global attention as the world's cheapest car, took a hit on its brand image after two Nanos caught fire in separate incidents in March and April, attracting local and international media attention with headlines screaming 'smoking Nano' and `Nano catches fire'.
Tata Motors has initiated some firefighting to drive Nano out of trouble before its image gets gutted.
The company has formed a core team of its best engineers and technicians to identify the root cause for the fire and find a solution by the end of this month.

Education Loans to become cheaper

Education Loans will become cheaper with the government planning to pay the interest for the duration of the academic programme, for which the student has taken the loan.
It is estimated that around 2-3% of education loans have turned sticky. So far public sector banks have given Rs 32,000-crore education loans to 16,98,601 students.
Under the proposal considered by the government, if the education loan is for seven years, which includes two years of study and a moratorium of one year, the interest cost for the first three years would be borne by government while the student has to pay principal and interest component for the remaining four years.
The interest holiday will be given only to students whose parents jointly earn a gross income of Rs 4.5 lakh or less.

Finance & Economy

Personalities shape Irda-Sebi turf war

The spat over which of the two regulates the much-fancied Ulips did not begin on April 9 at 10 pm, when market regulator Sebi banned 14 insurance companies from selling Ulips.
The seeds of the Sebi-Irda dispute were sown last August when the market regulator abolished entry loads for mutual fund schemes. But hardly anyone could have expected this to culminate in this very public spat, which is being increasingly shaped by the strong personalities.
Both sides have been discussing the issue since January but have failed to reach any agreement. Several discussions at the High Level Committee on Capital Markets, a forum for inter-regulatory coordination, have failed to yield results either. At a meeting held between the two regulators sometime in March, it was proposed that to create a level-playing field between insurance companies and mutual funds, the Irda would be the prime regulator of Ulips, with the insurance part of the product supervised by it while Sebi oversees the investment parts.
But Irda refused to buy the argument, since it has been mandated by law to regulate insurance companies, even though they invest in stocks. And Sebi stuck to its guns that since the funds are invested in stock markets, it can be treated as collective investment schemes, which fall under its purview.
A major bone of contention is the hefty commissions paid by insurance companies — as high as 45% of the first-year premium and has led to distributors recommending Ulips to investors over mutual funds' schemes — to agents. The insurance regulator says the problem has been addressed with a cap on Ulip charges.
At one fell swoop last Friday, Sebi banned 14 insurance companies from selling Ulips after getting a view from the attorney general Ghulam Vahanvati and informing the finance ministry.
But Irda jumped in to defend insurance companies and asked them to ignore the Sebi order.

An excellent criticism of the current FDI policy -- especially relating to banking

Do read this ET editorial. It is commenting about the recent policy changes terming the ICICI Bank and HDFC Bank as foreign banks. Verfy forceful arguments. Worth a read.

What is the spat between NSE and MCX-SX about?

Simply stated, currency derivatives.
Both the stock exchanges have recently entered into this segment, after it was opened up by RBI in August 2008, and a fierce competition has ensued between the two. The average daily trading value in this market was more than Rs 18,000 crore in December, 2009 as reported by Sebi. The waiver of transaction fee and charging a low security deposit by NSE has been alleged as predatory by MCX-SX.
The predatory pricing is a device used by a competitor not to benefit the consumers but to eliminate the competitor and once the object is achieved the price returns back to normal or even higher, if recoupment is also desired. Thus, if a predator succeeds in such a strategy, it is not the competitor alone but the consumer who is ultimately hurt in the long run.
Areeda-Turner test: This average variable cost test is often used as a proxy to marginal cost and is the most popular test used by the competition authorities across the world in predatory pricing cases. The test is based on the economic concept that a firm cannot price its product or services below the marginal cost of production, otherwise it will prefer to shut down its production in the short run to minimise losses, unless and until it has some other intent.

Why is Air India in trouble?

This is an excellent article from one of our favourite authors -- TT Ram Mohan.
He identifies two causes for its troubles: increased interest and depreciation charges arising out of fleet expansion before merger and high leverage. This may look simple at the first instance. Do read the article in full to understand comprehensively about the two causes.

On shale gas

In the context of the recent announcement that RIL has made investments in shale gas abroad, let us try to understand a little more about this energy source. Look at this graphic.

Medicine

Artificial blood vessles from Jatropha?

This is an interesting story. This humble weed proved to be an excellent source of a biodegradable material that can be put to a variety of uses. Take a look.

Language Lessons

verve: Noun

An energetic style
eg: But as IPL teams, they are very public bodies, celebrating India's collective verve for sport, competition, enjoyment and entertainment.

savoury: Adjective

Morally wholesome or acceptable
eg: For years it was the mecca for shoppers from the subcontinent, even though the Indian government was wary about some of its less savoury denizens who set up home and headquarters there.

pied a terre: Noun

Lodging for occasional or secondary use
eg: As the Sania-Shoaib story was eclipsed by the Sunanda-Shashi saga, the focus shifted to Dubai again as the personal and professional pied a terre of the lady in the limelight, and the base of some backers of the Kochi IPL cricket team.

chump: Noun

A person who is gullible and easy to take advantage of