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    CURRENT AFFAIRS (12.06.2013)

    1. The state of real estate

    The principle of buyer beware has never been an adequate protective measure inreal estate. Lack of transparency, information asymmetry and a maze oftransactions have put consumers in an unfairly disadvantageous position. Even themost vigilant among them find home buying an agonisingly risky venture. Whilemany countries have improved their regulations and climbed up the global realestate transparency ladder, India has been sliding steadily. From a poor 41st

    position in 2010, it has slipped further to reach 48th among the 97 countriesreviewed. Self-regulation has clearly failed. Realising the urgent need to protecthome buyers, the Union Cabinet has recently approved the Real Estate (Regulation

    and Development) Bill. This legislation, first conceptualised in 2011, is applicableonly to residential projects. The full text of the updated bill has not yet beenreleased, but the details circulated by the government indicate that it has largelyretained the original objectives. A State-level regulatory authority will be set up,and developers will have to disclose all the details of their projects and submitapprovals obtained to the authority, which in turn would make them public.Developers can advertise projects only after getting clearance, and mustcompulsorily deposit 70 per cent of the amount collected from buyers in a separate

    bank account. This would help prevent misuse of funds. Penalties for non-compliance include imprisonment.

    The new draft includes the activities of real estate agents. The proposed legislationhas also improved on the previous version in terms of applicability. Now, projectson plots larger than 1000 square metres in size will be covered by the new rules;this reduced threshold will help bring a greater number of projects undermonitoring. Some may argue that new regulations would increase the time andcosts of projects, and burden buyers. This objection is invalid since the bill is about

    presale checking, and projects cannot commence without clearance. Second, thegains clearly outweigh the costs. Regulatory measures are common even in mature

    property markets. For instance, the Property Misdescriptions Act 1991 in Britainmakes it a criminal offence to provide misleading or false information. Benamiholdings abound in the real estate sector and clean up measures must address these.Perhaps the use of UID numbers which is insisted upon even in disbursementsof subsidies for the poor should be made mandatory for property deals to trackthe money trail. The risks involved in property transactions would further reduce

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    when land record management, building approval systems and enforcementmechanisms are also improved.

    2. From park to nation

    The continuing public protests in Turkey, which started in Istanbuls Gezi Park butspread to several other cities, and the violence of the police crackdown, with three

    people killed and about 5000 injured, have exposed domestic fragilities that havesurprised many around the world. The protests started on May 27, when smallgroups of people gathered to protest against plans to bulldoze the park, one ofIstanbuls few remaining green spaces, for a shopping mall, and rapidlysnowballed as scenes of police violence went viral on the internet. The rapidurbanisation of Turkeys main cities, with the construction of huge and ill -servedresidential complexes on the outer edges of urban sprawls, is one cause of

    discontent. Such unchecked expansion has also given rise to a new elite in theconstruction business; politically and socially conservative, many of the owners arenatural supporters of Prime Minister Recep Tayyip Erdoans Freedom and JusticeParty (AKP). They have, moreover, benefited from the lax implementation of

    building regulations; allegations of corruption abound. The building boom, inaddition, may be more of an AKP political strategy than good business; 11 mallshave already closed in Istanbul alone. Furthermore, the influx into Turkish cities ofsubstantial numbers of building labourers from rural areas has caused tensions

    between the socially conservative labourers and longer-established urban residents,who for the most part strongly defend Turkeys strict constitutional separation of

    faith and the state.

    The crackdown, with Mr. Erdoan dismissing the protests as anarchy,nevertheless confirms how much the Prime Minister stands to gain by it and bycontinuing to intimidate the Turkish press. He does not need the support ofsecularists while the AKPs funding base and vote banks are secure; the party wonhalf the vote in the last election. Secondly, Turkeys geopolitical situation favourshis authoritarianism. He is very bitter about the European Unions message thatTurkish accession is on indefinite hold, and will ignore EU opinion. Thirdly,

    Ankara can rattle Nato by even hinting at the closure of Nato bases, many of whichwere installed by Turkish military dictators in the Cold War and which the westmay now see as a possible front against Iran. In addition, Turkey is too profitablefor western businesses to stay away from, even if the protests are currently hittingtourism revenues. Yet the countrys long democratic traditions are nowresurfacing, with AKP seniors expressing doubts about the repression and the

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    police pulling back from occupied squares and streets. Mr. Erdoan cannot andmust not maintain his intransigence indefinitely.

    3. India surprised by U.S. spy programme reports

    India on Tuesday voiced its concern at and surprise over reports that it was the fifthmost tracked country by the American intelligence apparatus, which reportedlyused a secret data-mining programme to monitor worldwide Internet data. We feelthat the Cyber Security Dialogue coordinated by the National Security Councils on

    both sides is the appropriate forum to discuss such issues. We intend to seekinformation and details during consultations between interlocutors on both sides onthis matter. If Indian laws relating to privacy of information about ordinary Indiancitizens have been violated, surely we will find it unacceptable, External AffairsMinistry spokesperson Syed Akbaruddin said. Yes, we are concerned and

    surprised over it, he said noting that reports about the spy programme was anevolving situation. We will take it as it evolves and have a better understandingand a clearer paradigm of how to tackle this issue once broader parameters in itsentirety are available for us, he said.According to the Guardiannewspaper, Indiawas the fifth most tracked country with 6.3 billion pieces of information beingcollected from the countrys computer and data networks in one month alone. Thedaily claims to have acquired top secret documents about the U.S. NationalSecurity Agencys data-mining tool, called Boundless Informant.

    Khurshids Norway visit

    On External Affairs Minister Salman Khurshidscurrent visit to Norway as Indiaembraces the Arctic Council, the spokesperson said India was also wooing the $700 billion sovereign wealth fund of Norway. He said the Minister would takeforward discussions that Fund officials had here with senior government officials,including Finance Minister, P. Chidambaram and Deputy Chairman of PlanningCommission Montek Singh Ahluwalia in April. The Minister will see how tofacilitate investments in to the country, including in the infrastructure sector, thespokesman said. The sovereign wealth fund, reportedly one of the richest in theworld, was a government pension fund. During the visit, Mr. Khurshid would alsohave a bilateral meeting with the Norwegian Foreign Minister and other seniorofficials, including the Prime Minister.

    4. India disputes Pakistanis claim on Roerich paintings

    Legendary Russian artist Nicholas Roerich could not have imagined that two of hisprecious paintings would one day become a bone of contention between a

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    Pakistani, who claims matinee idol Devika Rani gifted them to his grandfatherNazir Ahmed Khan, a known actor in the pre-Partition Hindi film industry, and theIndian government in a British court of law. There are interesting twists and turnsin this whole drama. The name of actor Devika Rani, daughter-in-law of NicholasRoerich, cropped up and was used by Zahid Nazir to bolster his claim that the lateactor had gifted Roerichs two outstanding artistic impressions to his grandfather

    Nazir Ahmed Khan, who was brother-in-law of filmmaker K. Asif. Indeed, NazirAhmed Khan worked in a number of Indian and Pakistani films. He was one of thefirst successful heroes in pre-Partition India and later migrated to the then newlyformed Islamic country after his studio in Bombay was burnt down during thePartition riots. Devika Rani was married to the famous Russian painters sonSvetoslav Roerich and naturally as daughter-in-law of the famous artist she musthave inherited his prized possessionsart works.

    While there is a possibility that she may have gifted the two artistic impressions toactor Nazir Ahmed Khan, the two paintings titled Himalaya Kanchenjunga andSunset Kashmir were the prized possessions of the Indian Agricultural ResearchInstitute (IARI) on Pusa Road before they were stolen in 2009. Subsequently, thework of art landed up at auction house Sothebys.Talking to The Hindu, a formerIndian Council of Agricultural Research (ICAR) Secretary rubbished thePakistanis claim. We cannot take Nazirs claim that Roerichs paintings had beenlying at his Lahore house in seriousness because they were our property till theywere stolen. Roerich Museum (St. Petersburg) director Krylov had seen the

    paintings at IARI in 1999 and Roerich Museum New York curator Tepsa had alsotestified that the paintings were the property of IARI.However, the IARI came toknow about the disappearance of the two paintings when Sothebys sent a lettereither in 2010 or 2011 informing that it had verified from the Roerich Museum of

    New York that the two paintings indeed belonged to the IARI. But the IARI didnot inform the ICAR. When we came to know through informal sources we

    jumped into action.To pursue the matter in all seriousness, a team comprising theCBI, IARI and ICAR went to the United Kingdom to meet lawyers and work outmodalities to bring the national heritage back home. The matter is in the Britishcourt even now. We are fighting the case, says IARI Director H.S. Gupta. Each of

    the priceless treasure trove costs over 2 million. In fact, a Delhi court recentlyasked the U.K. Home Department to allow the CBI to probe the case of Roerichs

    paintings being stolen from the IARI and presented to a London auction house by aPakistani and a British resident. It came to the IARIs notice that the two paintingswere presented to Sothebys for auction by Zahid Nazir, a resident of Pakistan, andhis father Rafay Nazir Khan, who lives in London. After the matter came to thenotice of Indian authorities, the attorney of Zahid Nazir and Rafay Nazir Khan

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    wrote to the IARI Director on May 16, 2011, claiming that they were the ownersand consignees of the two paintings. And the paintings have been in the familyownership since at least late 1960s or early 1970s and were kept at their familyhome in Lahore until they were shifted to Sothebys in 2010.

    5. India ranks 141 of 162 countries in peace index, even lower than Sri Lanka

    Indias ranking was brought down by militarisation, conflicts and corruption

    India ranks low at 141in this years Global Peace Index (GPI) that measured peacein 162 countries, according to 22 qualitative and quantitative indicators of theabsence and fear of violence. The major indicators that bring down Indias rankingare militarisation, domestic and international conflicts, and corruption. However,despite an increase in military expenditure, India made positive gains in its level of

    peace after reductions in deaths from internal conflict and the level of perceivedcriminality in society, according to the 7th edition of the annual GPI released onTuesday. In the South Asian region, Sri Lanka is one notch above India at rankfour while Bhutan is the most peaceful country. It is followed by Nepal,Bangladesh, Sri Lanka, India, Pakistan and Afghanistan, in that order. Globally, adramatic rise in the number of homicides and 59 more countries increasing theirmilitary expenditure as a percentage of Gross Domestic Product were the keydrivers in making the world a less peaceful place, according to the 2013 GPI. Thisyears findings underline a six-year trend showing a deterioration of five per centin global peace. In this time, 110 countries have seen their score deteriorate while

    only 48 became more peaceful. The economic impact of this five per cent loss inpeace came at a cost to the global economy of $473 billion last year.

    Rise in homicides

    The sharp increase in the number of homicides up eight per cent over the lastyearcan be almost entirely attributed to Latin America and Sub-Saharan Africawith, for example, the homicide rate in Honduras further increasing by almost 10

    per 100,000 people becoming the highest in the world at 92 homicides per100,000 people. Steve Killelea, founder and Executive Chairman of the Institutefor Economics and Peace (IEP), said: The migration of populations to urban areasin developing countries has been a key driver in the rise of homicides worldwide.This has also led to an increase in violent crime. It is essential for the police to gainthe trust of those living in city slums; to achieve this, addressing police corruptionwould be a first important step.The overall deterioration of the military spendingindicator in the GPI is primarily due to a large number of low-middle income

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    countries, typically authoritarian regimes like Iran, Iraq, Oman, Zimbabwe andAfghanistan, Cote dIvoire and Democratic Republic of the Congo havingincreased their expenditure to more than seven per cent of GDP. In contrast, someslight improvements were evident over the last year on the indicators of thelikelihood of violent demonstrations and the Political Terror Scale, a measure ofState-sponsored terror, with improvements in countries such as Kenya, KyrgyzRepublic, Zambia, and Tunisia. Syrias descent into civil war recorded the greatestscore deterioration in the history of the Index. Additionally, many Middle Easternand North African countries continue to be affected by the fallout from the ArabSpring with violent demonstrations and further political instability. The data alsorevealed evidence of countries being able to make significant gains in peace.Libya, for example, experienced the greatest rise in peace as its newly electedgovernment and recovering institutions were established following the turmoil ofthe recent revolution and civil war. North Africa also had more to celebrate as

    Sudan and Chad experienced the second and third most substantial gains as theirrespective conflicts eased. Europe remains the most peaceful region comprising 13of the top 20 countries, including Iceland, which continues to rank first. However,several high debt countries including Spain, Greece, France and Portugalexperienced less peaceful conditions amid challenging economic circumstancesduring the last year. This also reflects the six-year trend data, which shows thatcountries that suffer from recession decrease in peace at a greater rate than the restof the world.

    6. Rupee sinks to a new low, banks step in to stem slide

    It recovered to close at 58.39/40 per dollar against 58.15/16

    Breaking all barriers, the rupee fell to an all-time low of 58.98 per dollar intra-dayon Tuesday at the foreign exchange market. . However, dollar selling by publicsector banks and exporters prevented the Indian currency from dipping below the59 per dollar mark. The rupee recovered to close at 58.39/40 per dollar comparedto its previous close of 58.15/16. ``Re-surfacing of concerns on widening trade andcurrent account deficit (CAD) has lead to a sharp fall in the rupee, said Ajay

    Bodke, Head of Investment Strategy & Advisory at Prabhudas Lilladher. Dollar iscontinuing to strengthen against other currencies due to the belief that the U.S.economy is on the firmest footing among developed markets. This has rekindledconcerns about tapering of bond purchases by the U.S. Fed sooner rather than later,

    potentially impacting FII flows to emerging markets, said Mr. Bodke. WithIndias massive dependence on fickle FII flows to bridge its large CAD, Indiaremained particularly vulnerable to this potential development, he added. In June

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    itself, in few short days, the Indian rupee has depreciated over 4 per cent againstthe dollar, and more so against the other currencies such as Euro and Pound,said Anindya Banerjee, Currency Analyst, Kotak Securities. Fear of QE(quantitative easing) unwinding by the U.S. central bank and overly short

    positioning in dollar could have been the reason behind the movement of rupee. Aweak rupee does not augur well for corporates who have un-hedged foreigncurrency loans or large concentration of net imports, said Mr. Banerjee.However,he said that ``over the near-term, we could see a range bound action in rupee /dollar between 57.50 and 59.00, as recent spate of depreciation has been too fast,and a consolidation is warranted ahead of the U.S. Fed meeting on June 19.

    Stocks close lower

    A weak rupee and also a strong yen have triggered a sell-off in the domestic equity

    market. The Bombay Stock Exchange (BSE) 30-Share Sensitive Index (Sensex)lost 298.07 points or 1.53 per cent. The midcap and smallcap stocks lost 1.60 percent and 1.82 per cent, respectively. The fall was led by consumer durables, whichtumbled by 6.36 per cent, followed by metals 4.13 per cent, realty 3.68 per cent,

    banks 2.24 per cent, power 2.07 per cent and PSUs 2.04 per cent. All sectoralindices ended in the negative territory. A broader National Stock Exchange (NSE)

    Nifty ended at 5788.80 with a fall of 89.20 or 1.52 per cent. Other broader indicestoo were down. BSE 100 lost 1.56 per cent. BSE 200 and BSE 500 lost 1.59 percent each. Markets were weak largely because of the weakness in rupee and alsothe weak opening of European markets. We expect normal monsoons further to

    which fiscal reforms from Government of India on the core sector will providesupport to the markets going ahead, said Mr. Banerjee. The rupees suddendepreciation has led to some outflows and correction in the equity markets as well.The fact, however, is that in the past few months Indias fundamentals haveimproved, with inflation declining from 8-9 per cent in the last few years to about5 per cent levels, saidLalit Thakkar MD- Institution , Angel Broking. Becauseof temporary surge in gold buying as well as global jitters regarding QE, marketshave not yet factored in the domestic positives, said Mr. Thakkar. In my view, inthe coming weeks the market is likely to reverse its losses, he added.

    7. Curbs on gold imports showing results: Mayaram

    The Governments recent measures to curb gold imports have started showingresults, with the demand for foreign exchange for gold purchase going downsignificantly in the past five-seven days, Arvind Mayaram, Economic AffairsSecretary, said here on Tuesday. It (the demand for foreign exchange for gold

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    purchase) has come down from a peak of $227 million to $7 million in a particularday. The average has been $41 million, Mayaram said. Steps.taken on gold.They have started showing results, he added.

    RECENT STEPS

    Spiralling gold imports this fiscal had added pressure to the widening currentaccount deficit, which is estimated to have touched five per cent of gross domestic

    product as on March 2013. To tackle this situation, the Centre had on June 5 hikedimport duty on gold to eight per cent, from six per cent earlier. On its part, theReserve Bank of India extended certain existing restrictions on gold imports by

    banks to nominated agencies and premier trading houses. The central bank hadstipulated that gold imports on consignment basis by banks and nominatedagencies shall be permissible only to meet the needs of exporters of gold jewellery.

    The RBI had also stipulated that all letters of credit to be opened by nominatedbanks/agencies for import of gold under all categories will be only on 100 per centcash margin basis. It appears all these steps seem to have cumulatively helpedmoderate demand for foreign exchange to buy gold.

    NO NEW MEASURES

    Meanwhile, Raghuram Rajan, Chief Economic Advisor to the Finance Ministry,said he expected a significant drop in gold imports in June, mainly due to the jointefforts of the Government and RBI. We are not contemplating any additional

    restrictive measures on gold and there is no reason for speculating on this basis,Rajan said here on Tuesday. He said gold imports for the first 13 business days, tillMay 20, averaged $135 million a day. However, in the 14 subsequent days tillFriday of last week, the average was only $36 million. Indias gold import bill inthe first two months of the current fiscal was earlier estimated at $15 billion. It wasabout $7.5 billion in April. The average quantum of monthly gold imports so farthis fiscal was 150 tonnes. This is almost double the monthly average of about 70tonnes last fiscal.

    8. India allows exports of imported products to Iran against rupee payment

    India has allowed export of imported products to sanction-hit Iran under the rupeepayment mechanism provided 15 per cent value addition takes place in the country.The move is aimed at fuller utilisation of the rupee payments accumulated inIndias UCO Bank for oil purchased from Iran. Exports of such goods to Iranwhich have been imported against payment in freely convertible currency would be

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    permitted against payment in Indian Rupees also, subject to at least 15 per centvalue addition, a notification by the Directorate General of Foreign Trade said.Now that the entire payment to Iran for its oil is being made by India in rupee, itis much more than what can be paid to our exporters for the merchandise exports

    being made to Iran. By allowing imported items to be re-exported, the Rupeebalance could be used up substantially, a Commerce Department official toldBusiness Line. Iran is facing economic sanctions from the US and the EU for itsalleged nuclear activities, and has been boycotted by most companies in the West.Since foreign banks refused to handle payments to and from Iran fearingcrackdown by the US, India put in place a rupee payment mechanism last year tocontinue trading with the country. The mechanism allows payments for Iranian oilto be deposited in Indias UCO Bank in Indian rupees. The money is then used tomake payments to Indian exporters to Iran thereby avoiding payments in dollarsand through foreign banks. There is a substantial amount of rupee balance in Irans

    account lying idle which the Government hopes would be used up now that it hasrelaxed the condition of origin of goods for exports. Indian exporters havewelcomed the move but cautioned that there should be limits placed on the re-exports. The move will benefit Indian exports and we can look forward tosizeable growth in the countrys exports to Iran in the current fiscal. However, theGovernment should put a cap on such exports so that the basic idea of promotingmanufactured exports remains the focus, FIEO President Rafeeque Ahmed said.According to FIEO, the opening of Letter of Credit from Iran under the rupee

    payment mechanism has been impressive touching about $400 million on amonthly basis. With the new provision being put into place, we can look forexports close to $6 billion in 2013-14, Ahmed added. Indias exports to Iran in2012-13 increased 39.4 per cent to $3.36 billion from $2.41 billion in 2011-12,mainly due to the concerted efforts made by both countries to increase Indiasexports. While Indias oil purchase from Iran went down to 13.3 million tonnes in2012-13 from 18.1 million tonnes the previous year because of the Westernsanctions, Iran still has a trade surplus of about $8 billion with India.

    9. The mechanics of money

    Can ideas from the realm of science be applied in financial markets? A recent bookputs the issue in perspective. Let me start with an admission which is that I dontread as much as is commonly believed. Its just that I refer to books in myspeeches which conveys the impression that I am reading almost every book that is

    being printed. (Printed? Yes. Not sure whether I will, or indeed will ever want to,get into the kindlemode). That is guff; the reality is much less flattering. Thesedays, I read much less than I should or I need to. I lived in Addis Ababa in

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    Ethiopia for two years when I was in the World Bank; my family stayed back inIndia. After the job offer was made to me, my prospective manager took me out tothe best Italian restaurant in town and marketed the job to me all through thedinner.

    Best advice

    As we were finishing, he asked, Do you have any concerns? I said, All that yousaid about the job is very good, Fred. But, what do I do over the weekends? Hisreply was one of the best pieces of advice I ever received: Subba, think of all the

    books you wanted to, but could not read. Plunge into them. Thats exactly what Ididfor all of two years until I moved to Washington and all its distractions. It isnot that as Governor I dont get the time to read. I do. But the time that I ge t isirregular not the most conducive for book reading. I keep telling myself that I

    must read for at least half an hour every day, but have failed so far. So, when Ifinish reading a book, it feels like a big accomplishment. Its also comforting

    because I am at least trying to live up to the hype that the RBI Governor isa well-read person.

    Finance is people

    Ive just finished reading The Physics of Wall Street by James O. Weatherall, aPhD in physics, and now an Assistant Professor of Philosophy in the University ofCalifornia at Irvine. We all know that post-crisis, use of quantitative techniques in

    finance has come for a lot of harsh criticism, even ridicule. The charge is that theso-called quants brought in sophisticated mathematical modelling to finance,ignored the limitations of the assumptions underlying their models and made

    predictions with beguiling precision, all of which encouraged excessive risk-takingand brought on the eventual meltdown. Forgotten in this euphoria was the fact thatfinance deals with people, not physical objects. The laws governing financialmarkets are not immutable like the laws of physics. The most high-profile, if alsothe most strident of such critics, has been Nassim Taleb (Black Swans,Antifragility) who argues that the world is just too random and any attempt to find

    a structure is futile, and any claim to finding one is hubris. But there is another sideto this debate. The use of quantitative techniques contributed enormously to thegrowth of the financial sector. The Black-Scholes options pricing model, forexample, was more than a piece of geeky mathematics; it was transformational.

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    It ended the anti-intellectualism of American finance, demonstrated that a morescientific approach to speculation is possible and converted financial markets from

    bull rings to quantitative power houses.

    Engrossing history

    That story needed to be told and The Physics of Wall Street does that. But the bookis more, indeed much more, than a spirited defence of the value that quantitativeframeworks brought to the financial sector. It is an engrossing history of severalmathematicians and physicists who made a foray into finance with their differentmental constructs and tool-kits. Some of these transitions were serendipitous,others were more deliberate and structured but all of them were interesting andfascinating. The history that Weatherall tells starts much before Black-Scholes,actually with the French mathematician Louis Bachelier, and his 1900 paper which

    argued that stock prices capture all available information and move randomly. Thiswas in essence what later came to be formulated by the Chicago School as theefficient market hypothesis except that Bachelier didnt call it that. In a just world,says the author, Bachelier would be to finance what Newton is to physics. Aftertaking us through the history of several other scientists who brought fresh thinking,concepts and techniques to finance, the book ends with a rallying cry by the authorfor an Economics Manhattan Project calling on the advanced economies,

    particularly America, to invest intellectual and financial resources in an inter-disciplinary project with a lofty goal of generating ideas for making the financialsector an aid to real sector growth.

    Making things happen

    The use of quantitative techniques in finance has perforce to reckon with the quirksof human behaviour. As TheEconomist asked some years ago, is a hurricane morelikely to hit because more hurricane insurance has been written? Common sensesays no. But in the financial world, that common sense does not hold. The morefinancial insurance is written, the more likely that the insured event will occur

    because people who benefit from that contingency can make it happen. Can

    mathematical models replicate complex human behaviour? If they cant, are theyany good at all? The books answer is that making simplifying assumptions in

    building models leads to solutions to problems that are otherwise intractable. Butthose solutions are valid only as long as the assumptions underlying the modelhold. The difference between physicists and finance professionals, according to theauthor, is that physicists are trained to ask: When do the assumptions of my modelfail and what happens then? The post-crisis response should then be not to shun

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    quantitative modelling but to be conscious of the limitations of quantitativemodels. And, of course, to improve them to approximate reality as closely as

    possible.

    10. Micromanaging the chain

    Is government serious about FDI in retail or not?

    It was not so long ago that theUnited Progressive Alliance staked its survival on

    allowing foreign direct investment (FDI) in the retail sector. The point then made

    was that FDI would help the modernisation of India's leaky farm-to-plate chain for

    produce and empower local producers at the expense of middlemen. This logic has

    been assailed by many, but still seems essentially sound. The government then

    went out of its way to ensure that 100 per cent FDI in single-brand retail faced no

    more hurdles, making concessions to Swedish household goods giant IKEA in

    particular. It is puzzling, therefore, that the same dedication does not seem to be in

    evidence when it comes to FDI in multi-brand retail - where the supply-chain

    argument applies most strongly. Indeed, with the issue of recent "clarifications" by

    the Department of Industrial Policy and Promotion, or DIPP, the government

    seems to have decided to ensure that few, if any, actual foreign investors choose to

    enter the sector.

    The DIPP has set out several restrictions. For one, all structures need to be ownedby the company - which means that franchises won't be permitted. In addition, 50

    per cent of the total investment has to go towards back-end infrastructure - but

    buying existing infrastructure, however poorly used, won't go towards that total.

    This will tie up capital uselessly in unprofitable enterprises, rather than freeing it to

    go elsewhere in investment-starved India. Further, the clarifications make it appear

    to most observers that wholesale companies won't be able to sell their products to

    retailers from the same group, an unnecessary restriction if the ends of the policy

    are to ensure that corporate investment flows into the entire supply chain. Some

    retail business models would also require the operation of the back-end to be

    outsourced to more local operators - and the new definition of "group companies"

    appears to rule out that possibility. The law also stated that 30 per cent of goods

    had to be sourced from small and medium enterprises; the DIPP has further

    insisted that these sourced goods should not be agricultural and must be sold in

    http://www.business-standard.com/search?type=news&q=United+Progressive+Alliancehttp://www.business-standard.com/search?type=news&q=Governmenthttp://www.business-standard.com/search?type=news&q=IKEAhttp://www.business-standard.com/search?type=news&q=DIPPhttp://www.business-standard.com/search?type=news&q=DIPPhttp://www.business-standard.com/search?type=news&q=IKEAhttp://www.business-standard.com/search?type=news&q=Governmenthttp://www.business-standard.com/search?type=news&q=United+Progressive+Alliance
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    newly constructed stores, not through the acquisition of existing stores or through

    exports.

    On the one hand, it can be argued that these are merely attempts at closing the

    loopholes in the law and ensuring that retailers invest their money where thegovernment intends them to. However, that isn't a market-oriented way of going

    about things. If the point of higherFDI in retail was to trust capital to get to work

    at declogging India's supply pipe to its cities and towns, the government should get

    out of the way and not micromanage things. Instead, it seems to have decided to

    allow bureaucrats excessive power over where and what companies decide to buy

    and invest - which defeats the entire purpose of the legislation. Unsurprisingly,

    both domestic and foreign retailers are extremely unenthusiastic about the DIPP's

    actions. Prime Minister Manmohan Singh, at the time the Congress decided tomake an issue of FDI in retail, had addressed Indians on television; his party

    president spoke with him at a rally called on that very issue in Delhi. Dr Singh

    should now ask if it is his own administration's statist instincts, and not reluctant

    state parties, which are causing this forward-looking reform to face unnecessary

    hurdles.

    11. Urbanise, smartly

    Clearances will be key to new towns on Delhi-Mumbai corridor

    The concept of the smart city, planned to provide employment and high-quality

    services to residents, is attractive. Instead of the usual pattern of haphazard growth,

    smart cities provide for adequate housing, transport, power, water and sanitation.

    Besides, they pay due attention to energy efficiency, sustainable use of natural

    resources,railway connectivity and so on. The government has grandiose plans to

    set up such cities across 28 states. The proof of that concept depends on seven

    clusters along the Delhi-Mumbai Industrial Corridor, or DMIC. The DMIC

    connects the industrial heartland to ports on the Arabian Sea, running some 1,500

    kilometres across seven states. This region contributes 43 per cent of GDP and

    over half of industrial production and exports. The Dedicated Freight Corridor

    project will provide capacity to move goods at much higher speeds. Industrial

    production in the DMIC is projected to expand at a compounded annual growth

    rate (CAGR) of 13 per cent by 2020 and lead to massive employment generation.

    http://www.business-standard.com/search?type=news&q=FDI+in+retailhttp://www.business-standard.com/search?type=news&q=Smart+cityhttp://www.business-standard.com/search?type=news&q=Railway+connectivityhttp://www.business-standard.com/search?type=news&q=DMIChttp://www.business-standard.com/search?type=news&q=DMIChttp://www.business-standard.com/search?type=news&q=Railway+connectivityhttp://www.business-standard.com/search?type=news&q=Smart+cityhttp://www.business-standard.com/search?type=news&q=FDI+in+retail
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    The seven smart nodes are planned to cater to populations of between 1.3 million

    and 2.25 million, with commensurate employment.

    What of the cities themselves? The master plans of the DMIC Development

    Corporation, or DMICDC, have certain common concepts. Each city will begoverned from a command centre where information technology will be used for

    the real-time monitoring of energy, public safety, water, transport and logistics.

    The plans are polycentric, with multiple industrial zones and city business districts.

    Mixed land use is encouraged. Housing will be located near industrial zones with

    high-access mass transit corridors, thereby reducing personal vehicle use.

    Renewable energy capacities will be integrated to ensure power self-sufficiency.

    Water demands will be met by a combination of river water, new aquifers,

    reservoirs, desalination and water harvesting. Wastewater and solid waste will be

    recycled. Environmental damage will be minimised and agricultural land

    conserved, with extant villages integrated into the master plan. All this will cost

    upwards of Rs 55,000 crore. As far as possible, required investments in

    infrastructure are proposed to come through the public-private partnership mode.

    The DMICDC projects that break-even should occur around year 13.

    Given differences in state laws and differential levels of administrative efficiency

    in the seven states, land acquisition will take place through different modes in each

    node. Environmental and other statutory clearances would have to come from theCentre.

    These two issues - land and clearances - could be the make-or-break factors.

    Financing, especially private investments, will come only if these two elements fall

    in place - and they must. Projects like these must work if India is to undergo an

    orderly migration of population. Otherwise India's urban infrastructure will be

    overwhelmed. By 2030, over 40 per cent of Indians will live in urban clusters and

    contribute about 70 per cent of GDP.

    The sheer scale of India's internal migration dwarfs anything outside much better

    prepared China. Existing urban infrastructure is already stretched beyond its limit.

    Planned cities could provide an alternative to the miserable, under-provisioned

    urban clusters that are fast becoming the norm in India.

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    12. China's latest "sacred" manned space mission blasts off

    A Chinese manned spacecraft blasted off with three astronauts on board on

    Tuesday on a 15-day mission to an experimental space lab in the latest step

    towards the development of a space station. The Shenzhou 10 spacecraft waslaunched from a remote site in the Gobi desert in China's far west at 5:38 p.m.

    (0938 GMT) under warm, clear blue skies, in images carried live on state

    television. Once in orbit, the craft will dock with the Tiangong (Heavenly Palace)

    1, a trial space laboratory module, and the two male and one female astronauts will

    carry out various experiments and test the module's systems. They will also give a

    lecture to students back on Earth. China successfully carried out its first manned

    docking exercise with Tiangong 1 last June, a milestone in an effort to acquire the

    technological and logistical skills to run a full space station that can house people

    for long periods. President Xi Jinping oversaw Tuesday's launch personally,

    addressing the astronauts before they blasted off to wish them success, saying he

    was "enormously happy" to be there. "You are the pride of the Chinese people, and

    this mission is both glorious and sacred," Xi said, according to state media. This

    mission will be the longest time Chinese astronauts have spent in space, and marks

    the second mission for lead astronaut Nie Haisheng. It is China's fifth manned

    space mission since 2003, and was accompanied by the usual outpouring of

    national pride and Communist Party propaganda, including children dressed as

    happy ethnic minorities waving off the three at the space centre.

    However, some wondered why China was spending so much money exploringspace when it was still a developing country with a plethora of more pressingissues, from food safety and pollution to the prevalence of workplace fire disasters."Why don't they spend this money solving China's real problems instead ofwasting it like this?" wrote one user on China's popular Twitter-like service, SinaWeibo. China's space programme has come a long way since late leader MaoZedong, founder of Communist China in 1949, lamented that the country could not

    even launch a potato into space. But China is still far from catching up with theestablished space superpowers, the United States and Russia. Rendezvous anddocking techniques such as those which China is only testing now were mastered

    by the United States and the former Soviet Union decades ago, and the 10.5 metre-long Tiangong 1 is a trial module, not a fully fledged space station. Still, theShenzhou 10 mission will be the latest show of China's growing prowess in spaceand comes while budget restraints and shifting priorities have held back U.S.

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    manned space launches. China also plans an unmanned moon landing anddeployment of a moon rover. Scientists have raised the possibility of sending aman to the moon, but not before 2020. While Beijing insists its space programmeis for peaceful purposes, a Pentagon report last month highlighted China'sincreasing space capabilities and said Beijing was pursuing a variety of activitiesaimed at preventing its adversaries from using space-based assets during a crisis.Fears of a space arms race with the United States and other powers mounted afterChina blew up one of its own weather satellites with a ground-based missile inJanuary 2007.

    13. Concerted war only answer to Maoists

    Shocked over the recent audacious Maoist attack in Chhattisgarh, political partieson Monday unanimously rejected the pernicious Maoist doctrine and endorsed a

    stronger, sustained and unified operation against them without any compromise.This line had found support from the chief ministers of the states affected byMaoist depredations during the CMs conference also. Now that there is a politicalconsensus, it is time to translate the resolve into action on the ground. Jointoperations by security forces of the different states and the Centre have been on forquite some time, but what has been missing is a total collaborative exercise whereeach of the Naxal-affected states becomes a stakeholder in any anti-Naxal

    programme anywhere.

    Apart from training and equipping security forces with the latest weapons, the

    political resolve should not be allowed to weaken. The Centre and the states mustensure that unlike earlier occasions, when momentum was lost after similar

    brainstorming sessions, a co-ordinated attack against Maoists is stepped up. Whileit is crucial that intelligence on the movement of top Maoists must be strengthened

    by winning the confidence of tribals and village folk, the secrecy of co-ordinatedoperations must be protected. News suggesting a major operation will soon belaunched in Chhattisgarh has been doing the rounds for days, in a typical reflectionof poor secrecy. With the porous borders between states, it is not difficult forMaoist leaders to shift from a state where an operation is on way to comparatively

    safer hideouts in the jungles of a neighbouring state.

    On test in the coming weeks would be the sincerity of state governments to work inunison. The unfortunate tendency of some states has been to pay lip service to co-ordination but to neither share intelligence nor come to the rescue of another state.While the Union home secretary has time and again ruled out an army operation, it

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    would be foolhardy not to fall back on this if the co-ordination of police forcesproves illusory.

    14. Security should not compromise privacy

    The United States is engaged in a debate over the right balance between securityand privacy in the light of news reports, based on leaked government documents,that revealed details about the surveillance programmes run by the NationalSecurity Agency. While the defenders of surveillance, authorised by thequestionable Patriot Act, claim that it has disrupted plots and prevented terroristattacks, its critics debunk the argument that a programme to collect huge amountsof information about Americans phone calls and Internet activity has led to foilingany terrorist plot. Until the leaks, Americans had no clue that their telephone callswere being monitored and, thus, their right to privacy was being throttled

    If a comparatively free society with strong privacy laws like the US can have asecurity agency apparently running amok, there is no guarantee that the right to

    privacy will be respected in any other country. Such thoughts have arisen overreports that India is in the process of creating a multi-agency body called the

    National Cyber Co-ordination Centre, which will monitor all aspects of Internetuse. With the use of Internet by individuals, outfits and companies increasing byleaps and bounds for professional, business and entertainment purposes, anyagency which can monitor such activities will be privy to data that can compromisethe Internet users interests. It will strike at the roots of the right to privacy. The

    Supreme Court has said that the right to privacy is part of the right to protection oflife and personal liberty, enshrined in Article 21 of the Constitution andfundamental to the well-being of a nation. While the recent arrest of cricketers,

    based on the tapping of their phone calls, might have been justified, it is also apointer to the eavesdropping capabilities of police. To prevent US-style scandals inIndia, it is necessary to ensure all agencies involved in surveillance are governed

    by mechanisms that consider citizens right to privacy sacrosanct.

    15. Patents must balance profit with social cost

    The US Supreme Courts verdict on a rather unique case, which seeks to answerthe question if human genes can be patented, will soon be available. The caserelates to the claims of Myriad Genetics, a biotech company that has patented twogenes, BRCA-1 and BRCA-2, which are responsible for breast cancer. Accordingto a plaintiff in the case, the Myriads monopoly on the BRCA genes makes itimpossible for women to access other tests. As a result, this monopoly has

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    prevented the use of better technologies and pushed up costs. The rationale forpatents is to ensure that the inventors discoveries, or intellectual property rights,are not negated by other researchers. Normally, the rights relate to an inventionthat is totally new. In the present case, however, the question is whether the genes,which are natural, fall in this category. The BRCAs are, of course, not normalgenes but mutations that cause the ailment. Even then, to claim that the companyhas discovered them is stretching the point, for the mutations are a natural

    process which may or may not take place. However, Myriad has a point when itsays that firms which develop a process to identify the mutations have the right to

    patent it. Otherwise, investments in genetic research will be discouraged. Lowercourts have been unable to decide if the process of isolating a mutated gene iscreative enough to be patented since nature itself cannot patented. The judgmentwill be known in a few weeks even as film star Angelina Jolies mastectomyoperations followed the discovery that she carried the faulty BRCA-1 gene.

    However, since not everyone who is prone to cancer is a celebrity, a balance has tobe achieved between the commercialisation of research and its social purpose.Also, the publicly funded human genome project would have made the Myriadsdiscovery possible any way.

    16. NCTC only after consensus: Shinde

    Union Home Minister Sushilkumar Shinde on Tuesday made it clear that theCentre would not take any unilateral decision regarding the setting up of the

    National Counter Terrorism Centre (NCTC). Speaking at the Union Ministry of

    Home Affairs (MHA) monthly media briefing, Shinde said there were certainissues that needed to be resolved and he would soon consult all the opposing statesin order to evolve a consensus. When such opposition is there we will think overit and then decide. We need to evolve a consensus on it. I have said many a timethat both the Centre and the states need to work together. We cannot do it alone,he said. The minister also mentioned several vexed issues that were resolvedfollowing consultations between the Centre and the state governments,whichresulted in the revised Standard Operating Procedures (SOP) being incorporated inthe NCTC draft. First, the CMs objection that it should not be under the

    Intelligence Bureau (IB). So we took it off. They also said its operationalisationshould not be under the IB and that also we did. I will only say that we tried tohave a Central intelligence agency but they said a multi-agency centre is there, hesaid.

    On whether the Centre was planning to take the NCTC to the Cabinet Committeeon Security (CCS), Shinde said the MHA had received several inputs from the

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    opposing states, which were being looked into. Hence, a decision on whether totake the issue to the CCS will be taken only after the due process. As of now thereis no question of taking the NCTC to the CCS, the minister said. Chief Ministerslike Mamata Banerjee (West Bengal), Nitish Kumar (Bihar), Jayalalithaa (Tamil

    Nadu), Narendra Modi (Gujarat), Raman Singh (Chhattisgarh), Shivraj SinghChouhan (Madhya Pradesh) and Punjab Deputy Chief Minister Sukhbir SinghBadal have opposed even a watered-down proposal for NCTC during a recentmeeting on internal security here. The Home Minister Sushilkumar Shinde hadearlier said his Ministry was not exploring the option of bringing a Bill inParliament for the purpose. After the 26/11 Mumbai terror attack, the then HomeMinister P Chidambaram had announced the governments intention to set up

    NCTC. According to the February, 2012 executive order, which faced strongopposition from non-Congress Chief Ministers, NCTC will work as an integral

    part of Intelligence Bureau and its director will report to the IB chief. Besides, the

    anti-terror body was given power to carry out operations, including arrest, searchand seizure, while keeping the state police concerned in the loop.

    17. Rise in financial savings signal lower gold imports, safer rupee

    With anxiety growing in proportion to the rupee's fall, resurgent investor interest in

    financial instruments is good news. Investors have started putting their money in

    mutual funds and insurance, says the latest data from markets regulator Sebi and

    insurance regulator Irda. This is welcome diversion of savings from gold. Sebi's

    data shows net inflows of Rs 1.06 lakh crore into mutual fund schemes duringApril, the highest in two years. Independently, Irda sees a 19 per cent increase in

    the first-year premium collections of life insurers in April at Rs 1,334 crore against

    Rs 1,125 crore in the same month last year. This is a welcome sign that investors

    are regaining confidence in financial savings. To keep the momentum going, the

    government needs to come out with more products like inflation-indexed bonds

    (IIBs) and raise the foreign direct investment ( FDI) limit in insurance, so that

    private insurers can continue to grow their business prudential norms call for

    growing capitalisation of insurance companies as their premium collections grow.

    Gold imports have been a major factor in widening the current account deficit and

    weakening the rupee. The weakening of the global price of gold has already seen

    an erosion in gold's appeal as an investment option. When investors regain

    confidence in the ability of financial instruments to yield returns at least on par

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    with what gold offers, they would ditch gold. The April data suggest early signs of

    that happening. The government has been battling to curb the demand for gold. It

    has raised import duty to 8 per cent from 2 per cent. The RBI has disallowed

    import of gold on credit and directed banks not to import gold on a consignment

    basis for domestic use. The rupee's slide might seem to refurbish gold's sheen. Butthis would be transient. A lower rupee would make imports in general more

    expensive, leading to a lower current account deficit. And the rupee's slide could

    well reverse, making gold cheaper in the process. Gold remains a riskier option as

    compared to, say, IIBs. Household financial savings must return to double digits.

    18. Why the RBI Governor D Subbarao is wrong on regulating risk

    Last week, RBI governor D Subbarao spoke for the first time on the Financial

    Sector Legislative Reforms Commission (FSLRC) report. He focused on one

    aspect of the draft financial code, systemic risk, and made three points:

    > The Financial Stability and Development Council (FSDC), chaired by the

    finance minister,will have statutory status and the responsibility for safeguarding

    systemic risk.

    > This runs counter to the post-crisis trend around the world.

    >In a bank-dominated financial sector like India, the RBI as the central bank andlender of last resort is best placed to do systemic risk regulation and the FSDC

    should only coordinate.

    In the field of regulation, three phrases are used: systemic risk, macroprudential

    regulation and financial stability. Of these, "systemic risk" is the soundest phrase

    technically. The question of the appropriate regulatory mechanism for systemic

    risk and the role of government in it have been debated in the last five years. The

    current RBI Act does not envisage the central bank doing systemic risk regulation.

    Prior to FSLRC, the Raghuram Rajan Committee recommended the creation of a

    statutory Financial Sector Oversight Agency (FSOA), chaired by the FM, to work

    on systemic risk. Later, in 2009, the Advisory Panel on Financial Stability and

    Stress Testing, constituted by the RBI as part of the Committee on Financial Sector

    Assessment, recommended formalising the existing multi-agency arrangement.

    http://economictimes.indiatimes.com/topic/RBIhttp://economictimes.indiatimes.com/topic/rupeehttp://economictimes.indiatimes.com/topic/RBI-governorhttp://economictimes.indiatimes.com/topic/D-Subbaraohttp://economictimes.indiatimes.com/topic/Financial-Stability-and-Development-Councilhttp://economictimes.indiatimes.com/topic/finance-ministerhttp://economictimes.indiatimes.com/topic/RBIhttp://economictimes.indiatimes.com/topic/systemic-riskhttp://economictimes.indiatimes.com/topic/FSDChttp://economictimes.indiatimes.com/topic/Stresshttp://economictimes.indiatimes.com/topic/Stresshttp://economictimes.indiatimes.com/topic/FSDChttp://economictimes.indiatimes.com/topic/systemic-riskhttp://economictimes.indiatimes.com/topic/RBIhttp://economictimes.indiatimes.com/topic/finance-ministerhttp://economictimes.indiatimes.com/topic/Financial-Stability-and-Development-Councilhttp://economictimes.indiatimes.com/topic/D-Subbaraohttp://economictimes.indiatimes.com/topic/RBI-governorhttp://economictimes.indiatimes.com/topic/rupeehttp://economictimes.indiatimes.com/topic/RBI
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    field. This is a healthy departure from the vague idea that some have, that systemic

    risk regulation requires a super-regulator, with powers to override all financial

    regulators.

    19. Rupee fall: Indian exporters fret as counterparts in emerging economiesgain currency

    Indian exporters are facing stiff competition from their counterparts in emergingeconomies such as Indonesia and South Africa, as a sharper fall in their currencieshas erased the cost advantage of a lifetime-low rupee. Indonesia and South Africacompete with India in its main export marketsthe US and Europein textiles,agri-products, engineering goods, electronics and chemicals. Similarly, Thailand isIndia's biggest rival in the field of gems and jewellery exports, while Bangladeshcompetes with it for a share of Europe's readymade garments market. On Tuesday,

    therupee touched a lifetime low of 58.98 against the dollar, recording a more than7% fall since May. In contrast, South Africa's rand has depreciated by about 10%against the greenback during the period, while Thailand's baht has slipped by about7% since April. Indonesia's rupiah, which is witnessing volatility like the rupee,recorded a 1.988% drop on Monday. The Bangladeshi tacca has appreciated 5%against the dollar over the last one month that will give some competitiveadvantage to Indian garment makers. "With the rupiah and rand depreciating more,the plunge in theIndian rupee is not translating into gains for Indian exporters. Infact, for sectors involving high imports, the benefits have been nullified," saidAjay

    Sahai, director-general and CEO of Federation of Indian Exports Organisation.According to Sahai, Indian exporters are facing intense competition for new ordersfrom rivals in these countries as they too enjoyed cost advantage due to theircurrency depreciation.

    "South African rand has depreciated as much as the rupee, but its importdependence is less in terms of steel, which makes it gain much more in stainlesssteel and also engineering components to some extent, compared with India. It can

    be more cost competitive compared to us", said Pankaj Chadha of Jyoti Steelindustries. Appreciation in China's yuan has brought some joy, though. Chinese

    currency has gained 0.6% in value against the dollar this calender.

    Experts say Indian exporters had the competitive edge and should be able totranslate it to their benefit. "India could take the advantage of China's yuanappreciating...Most South East Asian countries dealing with China could switch toIndia looking to cut their sourcing dependence on China," said Biswajit Dhar,Director-General, Research and Information System for Developing Countries.

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    20. Rupee's decline: Commodity imports turn costlier in local market

    Indian consumers have not been able to take advantage of a fall in globalcommodity prices due to a weak rupee. Though prices of gold, crude palm oil, soyaoil and pulses have dropped in the global market, rupee depreciation has madeimports of these commodities costlier in the domestic market. Edible oil is one ofthe important commodities imported for meeting a growing demand in thedomestic market. Crude palm oil, which cost $973 per tonne in June last year, nowcosts $840 per tonne.

    "But the full impact of this drop cannot be passed on to the consumer as the rupee

    has weakened against the dollar, thus pushing up the landed price of edible oil,"

    said BV Mehta, executive director, Solvent Extractors Association of India. He

    added that importers were working on a margin of 2% -3% and if the rupee

    devaluates further, there may even be a price hike. In last June, the rupee was at55.53 as against the dollar. India needs 175 lakh tonne edible oil to meet its annual

    domestic demand. In the current oil year (November 2012 - October 2013), it is

    expected that India will need to import nearly 107 lakh tonne oil. In the last one

    week, the rupee has devalued by 4%. On June 5, the rupee closed at 56.70 against

    dollar. On Tuesday, the rupee devalued to 58.98 against dollar in early trade to

    close finally at 58.39. A weak rupee has forced pulses importers to stay away from

    the market for a while. KC Bhartia, chairman emeritus of All India Pulses & Grain

    Association, said importers were not placing any orders now. "They are on a wait-and-watch mode for the time being. Internationally, pulses price is hovering

    between $1,200 and $1,500 per tonne, which is somewhat less than last year. But a

    depreciated rupee will make pulses costlier," he said. India imports around 3-4

    million tonne of pulses to meet its annual domestic demand. Pulses are generally

    imported from the US, Myanmar, Turkey and Australia. "It is an unusual thing that

    we are seeing now. The government should come up with measures to make the

    rupee strong. Globally, commodity prices have fallen but prices are ruling high in

    India," said CP Krishnan, director, Geojit Comtrade. Gold traders and dealers saidthe government's move to curb imports to strengthen the rupee and bring down the

    current account deficit has not worked well.

    Internationally, gold prices have climbed down to $1,370 per ounce from $1,660

    per ounce in January. In January, 10 gm of gold would cost Rs 29,800 even though

    the rupee was at 53.20 level. Today, the price is around Rs 27,700 per 10 gm even

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    though international prices have come down by $290 per ounce. "We had told the

    government that a check on the supply side will not arrest the current account

    deficit. And that has come true with the rupee devaluating further. The government

    should immediately take steps to stop the usage of gold as an investment product,"

    said Bachhraj Bamalwa, director, Nemichand Bamalwa and Sons. India imported864 tonne of gold last year. Kishore Narne, head (commodity & currency), Motilal

    Oswal Commodity Broker, said movements in domestic commodity markets have

    largely been due to the volatility in the rupee and global markets are showing signs

    of nervousness before the German Constitutional Court hearing on the legality of

    the Outright Monetary Transactions. "European peripheral yields inch higher and

    with no major data releases, the volatility in currency markets will drive

    commodities," he said.

    21. Arrest that fall: Unleash a new round of reforms to reverse the rupee's

    slide

    The official view on the sharp depreciation of the rupee is that this is a temporary

    phenomenon, that there is no cause for panic. After all almost all developing

    country currencies have been experiencing downward pressure because the dollar

    is gaining, with a reviving US economy pushing the Federal Reserve to taper

    quantitative easing earlier than planned. But the fact is that the rupee is the most

    battered of the Asian currencies, its broader weakness attributable to India'ssignificantly larger current account deficit. So the government must abandon its

    business-as-usual attitude and actually create conditions to narrow the deficit,

    instead of just talking about this. The falling rupee has been a sustained

    phenomenon for more than two years now, forcing the currency to lose almost a

    third of its value against the dollar. This has largely been on account of growing

    trade imbalances, with exports slowing sharply while imports remain shored up by

    oil and gold. The current downward spiral of the rupee indicates either that trade

    imbalances continue to widen or that dollar inflows have further softened.

    But the RBI must desist from intervening to prop up the rupee. The falling rupee is

    emblematic of our economy's troubles where dollar payments exceed dollar

    inflows, growth has slowed and inflation grown. Further depreciation may lie

    ahead. First, this could work in India's favour, helping correct trade imbalances by

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    making exports more competitive and imports costlier. Bills for oil and other

    imported raw materials will also go up unfortunately. But pushing growth rather

    than imports has to be the priority when fighting back a serious imbalance on the

    trade front. Second, the scale of the rupee market now makes it increasingly

    unfeasible for the RBI to influence the exchange rate sustainably.

    Government should focus on controlling its runaway current account deficit, which

    would organically strengthen investor sentiment, the economy and the rupee. A

    number of policy options are available for this. Government could begin by easing

    foreign investment restraints in retail, insurance, pension funds, defence, energy

    and other sectors. It could buoy exports by pushing upinvestments in infrastructure

    and utilities as well as expediting project clearances. India must exploit the erosion

    of its currency to regain competitive advantage in manufacturing and exports.

    22. In the age of unlimited bytes, Uncle Sam shapes up as Big Brother

    Some months back, a young entrepreneur of Indian origin co-founded a company

    that, to oversimplify its expertise, reads your mind. Moninder Jheeta's Silicon

    Valley-based Expect Labs has introduced an app that can listen to an eight-person

    conversation, a virtual babble, glean sense from it, and suggest information that

    speakers may want to see or pursueeven as they are conversing. Jheeta, who is

    the chief technology officer of Expect, calls it "anticipatory computing". In time,the app can reside in devices ranging from your cell phone to your refrigerator to

    your car, instantly and constantly crunching data it gathers from around it,

    including the spoken word or conversations, to provide a stream of contextual

    information. Already, many US stores and corporations are using such

    breakthrough technologies to anticipate or capitalise on consumer behaviour.

    Several large US retailers use a service called Euclid that lets them track

    individuals' in-store movements through their smartphones' in-store connections,

    the same way website analytics track your online footsteps when you browse theinternet. From airport lounges to theme parks to movie theaters, tracking

    technologies, embedded and overheaded, are everywhere in your face and

    behind your back. Across the US and other digital-savvy parts of the world, they

    are gathering and generating vast amounts of data. Data, tons of it, is coming from

    computers, microphones, radio-frequency identification readers, remote sensing

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    equipment, and other modes. Data also comes from scientific research from

    astronomy and atmospheric sciences to genomics and particle physics.

    There is an innocuous sounding term for all this. Big Data. And it is getting bigger

    every day. The world's per capita capacity to store such data has roughly doubledevery three years since the 1980s. It is estimated that internet traffic will move up

    from the current Age of Exabyte (10 raised to 18) bytes to the Zettabyte Age (10

    followed by 21 zeroes) in 2015, when 100 exabytes of data (equivalent to 30

    billion DVDs) will be generated every month. That's a billion DVDs a day. And

    these are early days yet in the saga of Big Data. Next up is the yottabyte.

    Eventually, Big Data will encompass all spheres of activity, human and beyond.

    Social data relating to humans, including medical records, commerce, security

    surveillance etc, the kind that has us so agitated today because of its potentialmisuse, will form only a small part of Big Data, much of it generated by private

    companies aiming to monetise it. However, it appears the biggest purveyor of this

    data is government, and none more than the US government, simply by virtue of its

    role in engendering the internet and many related technologies. As the principal

    host to the world's internet architecture and infrastructure, the US is also in a

    unique position to monitor all data passing through it, despite expanding the data

    pie. News that Uncle Sam is playing Big Brother, and has indeed established a lock

    over digital data passing through the American gateway, has sent tremors across

    the free world, including in the US itself, where there is long and healthy distrust

    of big government. Lost in the rising crescendo of suspicion and disquiet is the fact

    that governments, including the Obama administration, were just starting to get the

    hang of big data analytics, especially from government generated data, for problem

    solving. From spotting outbreaks of disease and infections to better delivery of

    services, from code enforcement to combating crime, Big Data is enabling things

    that could not be grasped using smaller packets of information. The growing access

    of government data to entrepreneurs and innovators, a commitment Washington

    renewed this year under an open data policy, has already shown spectacular results.

    Two familiar examples cited by Big Data gurus: public release of weather data

    from government satellites and ground stations generated an entire economic

    sector that today includes the Weather Channel, commercial agricultural advisory

    services, and new insurance options. Similarly, the US government's decision to

    make the GPS, once reserved for military use, available for civilian and

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    commercial access, gave rise to GPS-powered innovations ranging from aircraft

    navigation systems to precision farming to location-based apps, contributing tens

    of billions of dollars in annual value to the American economy. So what does the

    US government do amid such promise? Shoot itself in the foot with an ominous

    overreach that, even accounting for the hyperbole of privacy advocates, is wayover the top. Looking for terrorist activity in big data is clearly a needle-haystack

    situation. The intrusive US enterprise even if legal under domestic law

    potentially has a more sinister end-use. How to extract the benefits from Big Data

    while not succumbing to overwrought paranoia will be a challenge in the days and

    weeks ahead, particularly at a time when privacy is not really prized by GenX.

    After all, it wasn't too long ago that cellphone numbers were jealously guarded.

    Now, people lay out their life on Facebook without fear. But to what purpose Big

    Brother will use all the information he is vacuuming into his vast data farms issomething that ought to engage the rest of the world, particularly when the

    principle actor is a government that is not particularly known for wise decision-

    making in matters of war and peace, and which has a well-chronicled record of

    marching to folly. So let the Americans know: No data grab. Not on our watch.

    23. Bilateral trade slows in 2013; analysts optimistic about long run

    Mechanical engineering, nuclear power, aviation, metals and precious stones,

    identified as areas with high potential for bilateral trade. The first four months of2013 witnessed a fall in bilateral trade between Russia and India with the Russian

    Ministry of Economic Development putting the number at $3.2 billion, a decline of

    about 27 percent from the previous year. Financial analysts, however, believe that

    the two countries are on the right track and have the potential to reach the $40

    billion in the next few years. Exports from Russia to India fell by 37 percent in

    from January to April 2013, while imports actually rose by 12.7 percent. There are

    two factors that explain the downturn in bilateral trade, according to Narek

    Avakyan, an analyst with Aforex. There is a general decline in business activity inSoutheast and South Asia, and Indian purchases of Russian-made weapons are

    effectively drying up. I am somewhat perplexed by the failures of Russian arms

    on the Indian market. The two countries have a long history of military

    cooperation, and India has been purchasing Russian-made defence products for

    years. Russian military products are some of the most competitive in the world,

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    even outstripping the United States. It could have something to do with the desire

    to cut costs (its well known that European manufacturers are lowering their prices

    because of the crisis), Avakyan said.Away from the defence industry, Russian

    exports are suffering because of poor trade routes and reduced economic activity.

    All the same, $1516 billion in bilateral trade is hardly through the roof for suchlarge economies. In spite of all the difficulties, I believe that trade between Russia

    and India has the potential to reach $40 billion, and this should happen within the

    next three to four years, assuming a favourable macroeconomic climate in both

    countries, Avakyan said. One important factor in bilateral trade is the Indo-

    RussianBilateral Investment Promotion and Protection Agreement (BIPA), which

    was signed in 1994. Moscow has requested New Delhi to amend the agreement

    with clear safeguards to protect large scale Russian investments.

    We actually suggested that our Indian colleagues modernise our currentagreement to some extent, Ekaterina Mayorova, a senior official of the RussianMinistry of Economic Development told RIR. This agreement was signed in1994, and since that time our approaches towards concluding agreements on

    protecting investments have changed several times, and the standard text withwhich we start negotiations has changed too, Mayorova added. BilateralInvestment Promotion and Protection Agreements with various countries,including Russia, are currently under review by the Ministry of Finance, IndiasMinister of State for External Affairs E Ahamed said in May. The fall in trade is

    nothing more than an illusion, as it is largely connected to the fact that India madesubstantial payments for Russian military goods and services in the first quarter (oflast year), giving the impression that bilateral cooperation between the twocountries is far less favourable than is actually the case, RBS President andinvestment expert Timofey Sholtes told RIR. Sholtes believes that trade relationscontinue to develop at a high rate thanks to active dialogue and coordinatedactivities. The fact that we have a long trade history with India is certainlyimportant, but we cant ignore the fact that each country has its own specific waysof doing businessone country has a high level of corruption, for example, while

    the other is not exactly transparent with its business processes. This creates someserious obstacles and hinders the development of joint business, Sholtes said.

    Current state of bilateral trade

    Russian exports to India currently sit at around $8 billion per year, with imports inthe region of $3 billion per year. According to the Ministry of Economic

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    Development, the main Russian exports over the first four months of this year wereautomobiles, machinery and technical equipment. Significantly, their share of theexport market increased from 53 percent in 2012 to 57.9 percent in 2013. Exportsof pearl and precious stones and metals also increased (from 8.1 percent to 12.9

    percent), while decreases were recorded in the supply of chemicals (from 18.2percent to 5.9 percent) and metals and metal-based products (from 7.8 percent to4.4 percent). India increased exports of chemicals, textile and footwear to Russia,and provided fewer automobiles, machinery and technical equipment. Analysts likeFIBO Groups Anatoly Voronin share the general optimism about Indo -Russian

    bilateral trade. There is room for increased cooperation in the military-industrialcomplex as well as in mechanical engineering, including nuclear power plantconstruction and the supply of technical and aviation equipment, and pearl and

    precious stones and metals, Voronin said. In return, India can supply medicines(one of the biggest areas), tea and coffee. They can also help set up joint

    enterprises (investment) in various fields including oil production enterprises suchas Sakhalin-1.

    Sakhalin-1 remains the main Russian-Indian joint investment project on Russiansoil, with ONGC Videsh Ltd owning the rights to 20 percent of the production.The main Russian projects in India are the Kamaz truck assembly plant, whichopened in February 2010 and the under-construction butyl rubber plant (jointlyowned by SIBUR Holding and Reliance Industries), which will have a productioncapacity of 100,000 tonnes a year. Aviation is another area of strong potential

    between the countries. A preliminary agreement has been reached with Aviotechon the delivery of tenSukhoi Superjets to India,with the end users assumed to beAir India and Go Air. The Russian side has also expressed interest in cooperatingin the production of individual components for the Irkut MS-21.

    24. India and the Boundless Informant

    It transpires Indians are being spied on by the USs top intelligence agency as a

    nation of naked apes. The Guardian newspapers startling disclosures regarding

    United States National Security Agencys top-secret data-mining tool called

    Boundless Informant pose a big intellectual challenge for Indian strategists andpolitical class. Simply put, it transpires that we are being spied on by the USs top

    intelligence agency as a nation of naked apes. Just consider that James Clapper,

    Director of the NIA knows everything that is needed to know about our political

    class. Our senior politiciansand the elites as a wholealmost without exception

    use Blackberry; they google; they do social networking; they converse over

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    Skype. Conceivably, the movers and shakers of Indias power calculus be it

    Rahul Gandhi, Narendra Modi, P. Chidambaram, A.K Antony, L. K. Advani, etc.

    all depend on the US-based internet servers. In fact, the government has freely

    distributed iPads to our parliamentarians to improve their efficiency at work. Most

    certainly, our top intelligence czars and army commanders use cellphones.Conceivably, US knows more about Maoist leader Muppala Lakshmana Raos

    daily routine than Home Minister Sushil Kumar Shinde does. So, what does it all

    add up to? Clearly, the damage to national security and our dignity and self-respect

    as a sovereign nation is incalculable. Yet, President Barack Obama rationalizes the

    US cybercrime on the world community. He says, In the abstract you can

    complain about Big Brother and how this is a potential programme run amok, but

    when you actually look at the details, weve [US] struck the right balance. Pray,

    what is the right balance? In Obamas own words, You cant have 100 percentsecurity and also then have 100 percent privacy and zero inconvenience. Were

    going to have to make choices as a society. There are trade-offs involved. Obama

    thinks it is fine that for the US absolute security, it has the prerogative to invade

    the privacy of the world community. But then, the US also has a deplorable record

    of double speak when it comes to counter-terrorism. Didnt Headley use a cell

    phone? Didnt he use email? There can be no beating around the bush now that the

    US didnt know anything about what David Headley spoke and did during his

    numerous covert missions to India for planning the horrendous terrorist strike in

    Mumbai in November 2008. The Big Brother used the information carefully,

    discreetly and selectively to the extent that it impacted on the US national security

    interests. Period.

    Without doubt, Boundless Informant challenges the very foundations of the US-India security partnership. India happens to be one of the principal targets in theBoundless Informants global heat map where countries are graded in colours green (for the least amount of surveillance), yellow, orange and red. India is codedorange and out of the total 97 billion pieces of information culled out by theBoundless Informant in March alone, India accounts for 6.3 billion. That works outto around 7 percent of all information being tapped worldwide by the US ace spyagency. It is time our pundits reworked their trade and learned to view the

    paradigm shift in world politics through the Indian prism. They are focused onChinas rise rightly sobut they blithely assume the US and India are naturalallies. Yet, India is a key target country for the US surveillance. Clearly, the US

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    factors in Indias future potential to become at least half a superpower. Suffice tosay, going up the greasy pole is not going to be easy for India, as evident from thereluctance of the world powers to admit it as a permanent member of the United

    Nations Security Council or from the Pentagon project to establish a militarybase in the Maldives so as to replace India as that islands provider of security. TheBoundless Informant comes as a wake-up call to the effect that what are Beijingswoes today from the USs containment strategy might as well beDelhis tomorrow if and when India begins to get its act together as a boomingeconomy and world power. Make no mistake that the West hopes to perpetuate theflow of modern history since the Industrial Revolution. That is at the core of thestruggle for the control of cyber space. Therefore, dont ask against whom is theUSs missile defence system being deployed in the Persian Gulf. The Americansmay tell the Sheikhs the ABM will contain Iran, but its radars and interceptorswill also monitor Indias rapidly growing missile capabilities, whichWashington

    consistently disapproved. The Boundless Informant reminds us that history has notended.

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