Demerge existing coking coal mines from CIL, says government panel!
2G scam controversy: Pranab Mukherjee meets PM Manmohan Singh; calls P Chidambaram a 'valued colleague'
Orissa floods may worsen; 20 lakh affected
Indian Holocaust My Father`s Life and Time - SEVEN HUNDRED TWENTY NINE
Palash Biswas
http://indianholocaustmyfatherslifeandtime.blogspot.com/
http://basantipurtimes.blogspot.com
http://mulnivasinayak.com/newbooks.php
Don't club caste census with poverty survey: CPI
SPECIAL CORRESPONDENTSHARE · COMMENT · PRINT · T+
The Communist Party of India on Friday urged the government not to club the caste census with survey work on poverty apprehending there would be inordinate delay in compiling the caste data in the absence of any timeline for completion of the task.
Raising the issue in the Rajya Sabha through a special mention, Syed Azeez Pasha (CPI) said that while the government had inserted the caste column into the poverty survey questionnaire, the processing of the two would be done separately.
The poverty data, he said, was to be processed by the State governments while information on caste would have to be separated and sent to the office of the Registrar General of India. "Whereas the poverty data has to be made available before the commencement of the 12th Five Year Plan in April 2012, no time frame has been announced by the government of India for completion of processing and publication of the caste data. It can be dragged on indefinitely."
He said raw and unusable caste data collected in the field would be transferred to the office of the Registrar General of India, which would sit on it for years in the name of "classifying" the castes.
According to estimates, Mr. Pasha said the present poverty-cum-caste survey would cost Rs. 4,000 crore.
"Instead of allowing precious time and funds to be wasted in this exercise knowingly, the government should immediately cancel this ill-conceived decision to club the caste census with the poverty survey and honour its existing Cabinet decision to hold a caste census under the Census Act through the Census Commissioner of India, in February 2012," the CPI MP said.
Keywords: caste census
http://www.thehindu.com/news/national/article2351590.ece
Global economy is at cross roads. It is adjusting to the new world order. Now China and India are calling the shots and driving the rules a great deal.Is it?Exclusion of NINETY Percent NON BRAHMIN NON Aryan Majority Aborigin Indigenous People and Barbaric APARTHEID MANUSMRITI Zionist Rule Based opn ETHNIC CLEANSING and Genocide Culture! FREE MARKET Economy is all set to DESTROY AGRARIAN RURAL India! Is it the Readjusting?
Nevertheless, as Pranab`s Budget set the Agenda of Second Generation Reforms under Intense US Imperialist Pressure added with Pro US Brahaminical Civil Society Movement and Corporate Lobbying and KILL the Ambedkarite Constitution, the HYPE of EMERGING MARKET with Glittering Fuiture is Created with Fullest Mind Control to justify the Mass Detruction!
Congress president Sonia Gandhi has not yet spoken on the subject, nor indicated her mind, even though she is meeting, on an average, two to three persons every day, the sources said. They stressed she would not do anything till Dr. Singh returns. »
Speaking to a small group of journalists on the margins of the annual World Bank-International Monetary Fund meeting in Washington OECD Secretary-General Angel Gurria said that there was no doubt that India and China are engines of growth for the world economy. »
Orissa floods may worsen; 20 lakh affected
SATYASUNDAR BARIKSHARE · COMMENT · PRINT · T+
The HinduVillagers tackling the flood waters in Godisaguda village in Puri district in Orissa. Photo: Ashoke Chakrabarty
3 helicopters pressed into service for dropping food packets
The major flood in rivers Brahmani and Baitarani has affected more than 20 lakh people in 10 districts of Orissa while many areas in the worst-affected Jajpur district have remained cut off.
Special Relief Commissioner's office said 17 persons died, mostly drowned, some of snakebite and in wall collapse — while two persons were reported missing in Angul and Keonjhar districts.
The highest flood casualty has been reported from Jajpur where six persons died. Four persons are reported to have lost their lives in Sundargarh district.
Besides, 10 persons were stated to be missing when the country boat they were travelling in overturned in Brahmani, under Gaandia block of Dhenkanal district on Sunday. The body of Aswini Kanungo, missing member of the Orissa Disaster Rapid Action Force, was retrieved in Dhamanagar area under Bhadrak district.
As thousands of villagers were encircled by floodwaters and relief teams were finding it difficult to reach them, the State government pressed three helicopters into service for dropping food packets. With the flood situation apprehended to worsen, two more helicopters would be used for rescue and relief operations. Chief Minister Naveen Patnaik reviewed the flood situation here on Sunday and asked the district administration to step up relief operations.
Bari Block in Jajpur district is the worst affected region. Special Relief Commissioner P.K. Mohapatra said: "Close to one lakh persons have been shifted. Alert has been sounded in all low-lying areas in Jajpur and Kendrapara districts. Those who were reluctant to leave their homes were being forcibly evacuated to safer places."
Brahmani was flowing at 23.60 metres at Jenapur against the danger level of 23 metres on Sunday afternoon. The Water Resource department said flow would continue to remain at the higher level for some more time.
However, floods in Baitarani have receded to below the danger level at Anandpur and Akhuapada.
The current floods soon after the recent ones in the Mahanadi have hit 3,128 villages in 10 districts. More than 1000 villages have been completely marooned. Flood waters have submerged houses up to the roof in many villages of Jajpur district.
Keywords: Orissa flood, Chief Minister Naveen Patnaik, relief operations, river Brahmani, river Baitarani
http://www.thehindu.com/news/national/article2485171.ece
2G scam controversy: Pranab Mukherjee meets PM Manmohan Singh; calls P Chidambaram a 'valued colleague'
NEW YORK: Finance Minister Pranab Mukherjeetoday met Prime Minister Manmohan Singh for the first time after the 2G note controversy erupted but refused to speak on the issue, saying the matter is sub judice and he would first speak to "valued colleague" P Chidambaram and other leaders.
After his nearly hour-long meeting with Singh at the New York Palace Hotel where Prime Minister is staying, Mukherjee said, "it would not be proper on my part to make any comment on that issue."
He was asked about the controversial note, prepared by a Finance Ministry official suggesting that the 2G scam could have been averted had the Finance Ministry then headed by Chidambaram insisted on the auction route instead of 2001 price for allotment of spectrum.
The Finance Minister began his comments on the 2G note saying "I am sorry. I cannot make any comment on it."
Mukherjee said, "Unless I talk to the Law Minister, unless I talk to to Chidambaram, who is our valued colleague, unless I talk to other party leaders and I go through all the relevant papers, what comments I will make and why should I make a comment on domestic issues outside India."
The Finance Minister's cryptic comments came on a flurry of questions by journalists on the unusual meeting that took place after he flew out of Washington for New York hours before his scheduled departure.
"I am not a fugitive. I am not leaving the country for all time to come. Therefore what I can say, what is permissible for me to say as the matter is sub judice. I am not a lawyer. I shall have to take expert opinion on it," he said.
Mukherjee, who was in Washington for IMF and World Bank meetings, said he has not cut short his visit nor cancelled any of his meetings.
"I spent almost one hour with him (Prime Minister)," the Minister said adding that he had briefed Singh on his interactions with leaders from America and Europe.
The Finance Minister, who will return to Delhi tomorrow, said he would be leaving for Kolkata soon after and hence he wanted to brief the Prime Minister.
Asked about the Finance Ministry's note, Mukherjee said that except for newspaper clippings, "I have no information and there I find it is a matter which has been produced...a piece of paper, a note from the Finance Ministry to PMO has been obtained through RTI and placed in court."
Told that the Opposition was making an issue of the note, he said, "It is their...oppositions's job. What else will the opposition do?
Mukherjee told the waiting media that since all of them wanted to meet him yesterday and that he was a bit rude, he thought he would interact with them today but quickly hastened to add "I am not going to give you any earthshaking news."
Demerge existing coking coal mines from CIL, says government panel
With coking coal production under CIL stagnating for several years, a government panel has said the PSU's mines for the commodity should be taken away, and a separate entity be formed for handling that.
"The existing coking coal mines should be demerged from CIL and a separate coking coal company may be formed. The new entity can continue to be under the government to begin with and to remain fully responsible for coking coal mining development," it said.
"Any non-coking coal that is mined in the process can be offered to Coal India Limited (CIL) at a reasonable price to be fixed by the regulator," it added.
The Panel, formed to examine policy issues linked to both raw material availability and infrastructure linkages for the steel sector for the 12th Plan, said that India has 33 billion tonne coking coal reserves in which CIL has 90 per cent share.
"There are several virgin coking coal assets currently lying underdeveloped with CIL and for which CIL does not have plan for development in the 12th Five Year Plan, it said.
"These assets may be put on auction and the highest bidder may be allocated these blocks...As the focus of CIL is on power grade coal, the coking coal production in the country has stagnated for the last several years," the Panel said.
The Panel, however, added the government may consider additionally or in substitute of setting up a separate firm, coking coal assets could be given for development to steel producers on a competitive basis.
"A policy may also be considered for allowing the surplus coal from such captive mines to other end-users through an appropriate mechanism either through CIL or certain other agency, with appropriate safeguards to prevent any misuse," it said.
The Panel observed that more than 30 million tonnes of low-grade coking coal gets diverted to the power industry due to lack of washery technology and washing capacity in the country.
"This should be gradually stopped and instead the coal should be supplied to steel plants for beneficiating and using in their own plants," it said.
Out of the total raw coal production of 531 million per annum, less than 17-18 million tonnes are of washable grade raw coking coal is produced in a year.
The Strategic Marketing of FREE Market Economy and Reforms Drive roots in PPP Model as this Example would prove!
Kerala-based, all-women micro-lenderKudumbashree will soon sign a pact for providing consultancy services to the National Rural Livelihood Mission with the objective of scaling up this flagship programme of the Rural Development Ministry.
Under the soon-to-be-inked agreement with the National Rural Livelihood Mission (NRLM), a flagship programme of the Rural Development Ministry, Kudumbashree will offer its micro-enterprise consultancy services to the mission.
"Kudumbashree will soon be signing a Memorandum of Understanding with the NRLM of the Union Rural Development Ministry. Under this, we will be offering our micro-enterprise consulting services to the mission," Kudumbashree Executive Director Sarada Muraleedharan told PTI over the phone from Thiruvananthapuram.
"Kudumbashree has been asked to function as a resource agency for scaling up the NRLM initiative and an MoU is being entered into between the mission and us shortly to take this programme to other states," she explains.
The micro-lender, credited for revolutionising Kerala's rural economy in 90s, is involved in rural economy development, one of the core principles of Gandhian philosophy, which envisages every village being a self-sustained unit.
It was launched in 1998 as a joint programme of the Kerala government and the National Bank for Agriculture & Rural Development to remove absolute poverty through concerted community action under the leadership of local self-government bodies.
It is one of the largest women-empowerment projects in India today, with four million women members, and covers over 50 per cent of Kerala households.
Kudumbashree runs 2.3 lakh neighbourhood groups. Each group has 10-20 poor women as its members and an average Rs 40 is collected every week from each of them.
In Malayalam, Kudumbashree means prosperity (shree) of the family (Kudumbam).
Total savings by neighbourhood groups stood at Rs 1,549.5 crore as of January, 2011, and the internal loans generated since inception stood at Rs 4,372 crore.
In 2010-11, total thrift collected by the organisation stood at Rs 178 crore and the internal loans generated at Rs 459 crore, while in the previous fiscal, total thrift collections touched Rs 198.6 crore and internal loans disbursed by the organisation totalled Rs 893 crore.
Built around three critical components -- micro-credit, entrepreneurship and empowerment -- the Kudumbashree initiative is implemented through community development societies.
It has succeeded in addressing the basic needs of less privileged women, thereby providing them a more dignified life and a better future, says Muraleedharan.
She further said the micro-credit enterprises (MEC) model of Kudumbashree was recently visited by the representatives of the NRLM, who felt this was a model that should be made available in other states as a best practice that can be replicated.
Pointing out the challenges she faced in scaling up the MCE model, Muraleedharan said micro-enterprises have many challenges to overcome with respect to scaling up their activities and access to technology, credit and markets, among other things.
25 SEP, 2011, 10.12AM IST, DEBASISH ROY,ET BUREAU
World not on the verge of a crisis; it is just re-adjusting
EDITORS PICK
- US pressures Europe to act with force on debt crisis
- Global crisis: Is China's economy in trouble too?
- Euro zone crisis clouds recovery in Europe, Central Asia
- Global economic crisis will improve in a month's time, says C Rangarajan
The Europeans are suddenly uncomfortable in their new role of living in losing economies. Earlier they wallowed in wealth accumulated over the centuries through banking and subsidized industry. The USA has pushed its borrowing and consuming model a tad too far. Debasish Roy insists the crisis is just new equations and new roles
The sale of consumer goods is going up. The figures for the sale of cars are fluctuating wildly for all companies. The stock markets are never sure, which way they are going; gaining and losing within a single week continually. Are we experiencing something new here?
The world and its grandmother are worried that another 2008-09 style financial and economic crash will follow soon.
Their fears are unfounded. The 2008-09 economic meltdown happened owing to greed in the real estate mortgage industry in the United States. Bankers and investment bankers sold high risk components of loans for low prices and they were resold to eager beavers.
This created a mismatch in the world of real estate finance as high risk products were being sold for a low price. This disturbed the natural order of things in finance and down went the world economy.
The result was a concerted world effort to bring down the beast of uncertainty. This time things are different. Europe is divided and some countries are on the verge of ditching the Euro after enjoying membership to the EU for quite some time.
It is a bit like Fidel Castro's Cuba. The people are tired of making sacrifices for the economy and now want to run every man for himself.
The recent reports about China developing a cozy relationship with Italy to shore up the flagging Adriatic economy re-affirms this column's stand that the world is not on the verge of a crisis; it is just re-adjusting.
Think of the time when the omnipresent hobby camera began to turn into digital models from the erstwhile film - bromide paper models. Earlier we had a concrete channel and system to conduct transaction in the camera and film industries.
This got disturbed when the digital cameras started making their appearance. Earlier, film manufacturing companies used to make miles and miles of film, which used to be cut into size and packed into rolls. Distributors, retailers and consumers paid per roll of film.
I nve n t o r y used to be measured with a roll as an SKU or a crate of 24 rolls as an SKU depending on the country you were selling in.
Now with no film to buy or carry, these inventories have disappeared. The warehouses , which were rented and maintained for this purpose became dysfunctional. The new SKU is the camera and not the film. The dynamics of sending a picture to friends and colleagues became altogether different as now pictures could be emailed instead of put inside an envelope and mailed.
More stories from this edition of Financial Times
http://economictimes.indiatimes.com/features/financial-times/world-not-on-the-verge-of-a-crisis-it-is-just-re-adjusting/articleshow/10111672.cms
The 12th Plan document that seeks to raise the economic growth rate to 9 per cent during the five-year period will not be ready by April 1, 2012, the day the next Plan begins.
As per the schedule, the Planning Commission will begin writing the 12th Plan document that runs into several volumes after March 2012.
Traditionally, the Plan panel has been unveiling the policy documents after the lapse by several months and this time it would be no exception, sources said.
"The Commission is scheduled to complete spade work relating to formulation of the Plan document by March 2012. This includes submission of reports of steering committees and working groups and eliciting views of different ministries and departments," the official said.
After the finalisation of the document, it will be placed before the full Planning Commission, the Union Cabinet and the National Development Council (NDC), the highest policy making body of the country. This exercise is likely to take time.
The documents for 10th and 11th Plans too were finalised much after the beginning of the respective Plan periods.
The 11th Plan which began in April 2007 was approved by the NDC in December 2007. Similarly, the 10th Plan which begun in April 2002, was cleared for implementation by the NDC in December 2002.
As far as progress of the 12th Plan documentation is concerned, the NDC had approved the 'Approach Paper', which provides a broad framework of the government policy to be pursued in the five-year period to achieve the desired growth rate, on August 20 last.
The Approach Paper would be the basis for running the various government programmes and schemes till the new Plan is unveiled and implemented, the official said.
24 SEP, 2011, 02.50AM IST, SOMA BANERJEE,ET BUREAU
ONGC hit by government's ad-hoc policy on oil subsidy
Oil And Natural Gas Corporation Ltd.
BSE
257.80
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Vol:343632 shares traded
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257.80
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Vol:4869208 shares traded
Prices|Financials|Company Info|Reports
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ONGC is India's maha navratna, a crown jewel in the government's asset bank. Yet, the owners, it would appear, are unsure of its market valuation. Last week, the government decided against launching an offer to dilute a part of its holding through a follow-on public offer, barely days before the issue was slated to hit the market. Unconfirmed reports said the decision to pull out was taken by the disinvestment department as it was unsure of the response to the issue.
Although the reason cited was poor market conditions, the reason for pulling out at the last minute is much deeper. It has a lot to do with the impact of the government's policy flip-flop on oil subsidies. Investors are no longer willing to buy the scrip on government assurances alone. Subsidy-sharing by oil-producing companies such as the ONGC or an Exxon Mobilabroad that makes super profits when crude oil prices rise is not new. It happens all over the world and India is no exception.
But what is different in India is that subsidy bills for ONGC are left to the whims of the government without a pattern or logic to it. It has accentuated even more with the government opting to give only cash subsidies. This leaves a greater burden on ONGC to fill the yawning gap in the losses suffered by the oil companies for selling petroleum products at government-controlled lower prices. The losses, in parlance, are called under-recoveries (the difference between the claimed cost price and realised price).
This raises a fundamental question about the health of the company that is the country's largest profit-making government-owned company, and third-largest in market cap after Reliance Industries and Coal India. It is difficult to explain why investors should lack the appetite for investing in such a company. While it may be argued that the market tidings have not been at their best, there is a need to look beyond the headline news.
The government's stand on subsidysharing in the oil sector has been ad hoc. Despite three committees - headed by eminent policymakers such as PM's economic advisory council chairman C Rangarajan, Planning Commission member B K Chaturvedi and former Planning Commission member Kirit Parikh - spelling out how to address subsidy burden and how upstream companies like ONGC and OIL could pay their share, the government has continued with a practice that lacks transparency.
Upstream companies pay their share of subsidies through discounts given in crude oil prices when they sell the oil to oil marketing companies. So, ONGC sells its crude at heavily-discounted prices to cushion losses of downstream oil companies. For example, ONGC sold oil at $53.77 a barrel in 2010-11 against the prevailing average price of $89.41 a barrel.
It is another matter that the subsidy bill - as claimed by the petroleum ministry and oil marketing companies - has many unanswered questions. But, at the end of the year, or every quarter, the government hands out a subsidy to ONGC, that it pays by discounting the bill it raises on the sale of crude oil. The amount is unknown to the company and its shareholders as the under-recovery is calculated at the end of every quarter that decides the subsidy bill ONGC has to share. This leaves stakeholders in the dark on the returns. In most cases, oil-producing companies such as ONGC use crude oil prices as a yardstick to estimate their profits.
Not so in India. The returns for ONGC depend on the subsidy numbers put out by its peers in the downstream sector and the government's take on how much of it should be shared by ONGC. Not surprising then thatGoldman Sachs, an institutional investor in ONGC, had raised questions of corporate governance in 2009, as it alleged that the owner and majority holder, the government of India, had taken $20 billion from ONGC over the previous six years. "Since 2003-04, the promoter (government, which owns a 74% stake) has taken away cash from the company on a quarterly basis for subsidising lossmaking state-owned downstream companies. So far, ONGC's promoters have taken cash of almost $20 billion from the company without consulting the minority shareholders," news reports citing the report had then said.
The same story continues today, though the magnitude is much larger. Despite all its financial numbers, ONGC has been forced to admit the policy of subsidysharing as a risk factor in its draft red hearing prospectus. A comparative study of the offer documents between 2004 and 2011 - ONGC shares were offered to the public for the first time in February 2004 - show that sharing of subsidies was a risk factor even then.
The share of subsidies has gone up exponentially over the years. If in 2003-04, ONGC had to pay out Rs 2,690 crore as subsidies, it has had to fork out a whopping Rs 21,334 crore in 2010-11. And this may not yet be the highest ONGC has had to pay out as part of its share as far as subsidies are concerned.
The government has not been able to put a transparent subsidy-sharing policy in place. It follows an ad-hoc system, where the government dips into ONGC coffers to pay out subsidies to oil marketing companies: IOC,HPCL and BPCL. Else, these companies would have been in the red.
The government, over the last 10 days, has taken some proactive steps to show its intent on oil pricing reforms. To start with, it allowed oil marketing companies to exercise their pricing freedom on petrol.
The government even dared scheduling a special empowered group of ministers meeting on limiting subsidies by regulating the number of cooking gas cylinders at subsidised rates a consumer could get in a year. Unfortunately, the EGoM could not keep its date and political compulsions took precedence over commercial prudence.
http://economictimes.indiatimes.com/news/economy/policy/ongc-hit-by-governments-ad-hoc-policy-on-oil-subsidy/articleshow/10097794.cms
24 SEP, 2011, 02.52AM IST, JAIDEEP MISHRA,ET BUREAU
Emerging market economies facing risk of 'sharp reversals'
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The latest Global Financial Stability Report of theInternational Monetary Fund (IMF) stresses that emerging-market economies face the risk of 'sharp reversals', and so must watch out for the build-up of 'financial vulnerabilities', including of the cross-border variety. After all, the global economy is now much more interconnected. A recent IMF working paper is on public debt levels in the advanced, high-income economies, and how they have spillover effects on long-term interest rates in the emerging markets.
The paper is based on empirical evidence from 53 economies, 28 of which are advanced economies (read: the North) and 25 emergingmarket economies (read: the South), with about 430 cross-country observations for the North, and 280 similar iterations for the South: the sample size is large indeed. Broadly, as per the regression equations worked out in the study, past a threshold level of 70-80% of GDP, every one percentage point increase in the debt-to-GDP ratio in the North tends to rev up real interest rates in the South by 10 basis points, going by 2010 debt levels (1% is 100 basis points). Public-debt levels have hugely increased in the North in recent years -in particular US debt - so the end result is likely to be much stronger interest rate effect.
Also, the paper is on the implications for real interest rates, net of inflation. After taking into account price rise, the effect of heightened public debt in the North on nominal interest rates in the South would be far higher. Further, a current account deficit, as in India - which means a deficit of domestic savings over investment - would only exert upward pressure on real interest rates, the paper implies. Additionally, Operation Twist of theUS Federal Reserve, to artificially cheapen the cost of mortgages, corporate bonds and other kinds of credit - and so boost investment there - would likely lead to a global rebalancing of interest rates and their hardening in the South.
The game plan is that the Fed would be buying long-term federal debt over the next several months, and raising money for the purchases by selling short-term debt holdings. No wonder stock prices here are on a downward spiral amidst much volatility, the rupee is weakening and the latest overall growth estimates by the mavens are much lower than that only a few months ago.
Why is it that a rise in the fiscal deficit financed by public debt in the North tends to harden real interest rates in the South? In theory, a rise in government debt could imply that the subsequent future domestic tax burden is fully anticipated, which in turn leads to offsetting rise in private saving, thus leaving longterm interest rates unchanged.
This is as per the rational expectations school - and termed Ricardian equivalence. But models with non-Ricardian features do envisage that an increase in fiscal deficit and debt would tend to drive up real interest rates, by crowding out private investment and the like.
It can be shown in a two-economy model: a rise in the fiscal deficit financed by debt in one economy has a way of increasing short-term private consumption - as agents do not quite internalise all future increases in taxes necessary to repay the high debt.
It would result in a medium-term fall in the saving rate in that economy. And to re-establish an equilibrium in world saving and investment, real interest rates would tend to rise and real investment to fall. Hence the spillover effects to the other economy, where output and consumption would likely decline in relative terms. And empirical data suggest that the relevant transmission channel internationally is mainly via interest rates; the trade channel seems to be weak.
Besides, an increase in public debt in the mature economies would raise the global risk-free rate and also hike spreads on sovereign bonds across borders. Actually, in such a scenario, bond yields in the South would increase more than the global risk-free rate, as investors would want to be compensated for the increased likelihood of a 'sovereign credit event'.
The paper mentions that the standard hypothesis is that the relation between the level of public debt and long-term bond yields has a U-shaped form. When the stock of public debt is limited, additional government borrowing can increase market liquidity, reduce volatility and, thereby, lead to a surge in demand - and boost bond prices and, consequently, reduce yields.
At higher levels of public debt though, liquidity factors begin to play a smaller role, and the crowding out effect and sustainability concerns come to the forefront. Higher GDP growth in the South would tend to lower bond rates, as higher growth would boost revenues and likely reduces sovereign risk. The bottom line is that stepped-up public debt in the advanced economies does exert 'significant upward pressure on long-term yields' in emerging markets, concludes the paper.
(Public Debt in Advanced Economies and its Spillover Effects, Lorenzo Forni et al, IMF working paper, August 2011)
http://economictimes.indiatimes.com/news/economy/policy/emerging-market-economies-facing-risk-of-sharp-reversals/articleshow/10097820.cmsBUSINESS
C. R. L. NARASIMHAN, September 25, 2011RBI annual report imparts 'downward bias' to India's growth rate
SHARE · COMMENT · PRINT · T+D Subbarao
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economy, business and financeThe Annual Report for 2010-11, a statutory publication of the Reserve Bank of India's central board, covers two broad areas — assessment of macroeconomy in 2010-11 as well as prospects for 2011-12 and working and operations of the RBI and its financial accounts.
The latest report released on August 25, like its predecessors, is a snapshot of the economy in the previous year even while it assesses its strengths and weaknesses during the current year.
Excerpts from the report covering growth prospects, inflation outlook and certain other aspects of the macroeconomy in the current year are given here.
The economy returned to a high growth path in 2010-11. However, there were significant challenges: investment slowed, fiscal consolidation was achieved through one-off and cyclical factors and inflation remained sticky on the back of new pressures.
In response, the RBI has raised the policy rates by 475 basis points (on a cumulative basis) since March, 2010. The central bank's medium-term target for inflation has been 3 per cent.
The current account deficit was contained within a reasonable limit, mainly due to an upswing in exports and a turnaround in invisibles.
Growth prospects
After growing slightly above its recent trend in 2010-11, the economy can be expected to decelerate this year. But quite significantly, the growth rate will still be around 8 per cent. However, there is a possibility of global problems getting magnified and imparting a 'downward bias' to India's growth rate.
In general, growth prospects in the current year appear to be more subdued than last year. Apart from global uncertainties, high prices of oil and certain other commodities have a dampening effect. Other factors weighing on growth are persistent inflationary pressures, rising input costs, higher cost of capital (due to monetary tightening) and slow project execution.
While industrial growth may suffer because of loss of business confidence, the services sector is expected to make up for the shortfall and support the overall growth process.
Investment may remain soft in the near-term, while private consumption may decelerate. In the face of moderating demand, 'expenditure switching' from government consumption expenditures to public investments would help. Inflation is expected to remain high and moderate only towards the latter part of the year to about 7 per cent by March, 2012. The decline in global commodity prices has not been significant so far. However, if the global recovery weakens further in the days ahead, commodity prices may fall and that may have a salutary effect on the Indian economy.
The ultra soft monetary policy pursued by the U.S. can keep commodity prices elevated. If the global oil prices stay at current levels, further increase in prices of administered oil prices will become necessary to control subsidies. Fertilizer and electricity prices will also require an upward revision in view of sharp rise in input costs.
Monetary policy by itself faces inherent limitations in tackling inflation in the absence of adequate supply side responses.
However, it can still play an important role in curbing the second round effects of supply-side inflation. In the face of nominal rigidities and price-stickiness, there are dangers of accepting the current elevated inflation level as the new normal.
The twin deficits
The fiscal deficit is likely to overshoot the budgeted provisions. If the economy slows down further as is anticipated, the erosion in revenue will magnify the fiscal slippage. Also, the space for counter-cyclical fiscal policies is more limited than it was at the time of the global crisis in 2008.
On a more positive side, the current account deficit (CAD) is expected to be contained within a sustainable 2.7-3 per cent of GDP. The export performance has been robust in 2010-11.
However, by all accounts exports are expected to slowdown later this year due to the deceleration in the advanced economies. Software exports too will be affected as bulk of them are to the U.S. and Europe.
Capital flows are more difficult to anticipate. Their ebb and flow depend on the degree of risk aversion. If the global crisis deepens, capital flows will moderate. However, capital flows can increase in spells on a relative return basis and due to interest differentials.
Medium-term challenges
The immediate challenge to sustaining high growth lies in bringing down inflation. Over the medium-term, however, growth can be sustained only by addressing the structural bottlenecks.
The medium-term challenges are: Lowering inflation and inflation outlook to acceptable levels; harnessing technology for agriculture productivity enhancements; maintaining right balance between consumption and investment; facilitating energy security; facilitating infrastructure finance; and promoting financial inclusion and inclusive growth.
Keywords: RBI annual report, India's growth rate
http://www.thehindu.com/business/article2484737.ece
25 SEP, 2011, 09.57AM IST, TV MAHALINGAM,ET BUREAU
Below poverty line: Can you live a day in Mumbai on Rs 32? Find out!
I think it is possible to spend just Rs 32 a day and not starve," said the man wearing the floral shirt, rather loudly.
"Not in Mumbai or Bangalore...maybe in Sangli or Satara," said his partner, even as he shuffled a pack of cards and spread them across a suitcase resting on the legs of his partner. The two other card players and this correspondent listened quietly.
"I can live for less than Rs 32 a day," replied floral shirt as he picked up his cards. "Can you?" he mocked his partner.
It's an unusually hot Wednesday afternoon in Mumbai and the conversation in this 'first-class' compartment of a suburban train is the usual mix of whispered stock tips, and angst about the money Dhoni and his men are making. Chitchat about poverty is out of character in a train which cuts through some of the most appalling slums in the whole world.
But then again, the wise men and women of the Planning Commission had told the Supreme Court that that anybody who spends Rs 33 or more a day in cities is not poor and hence not eligible for a below poverty line(BPL) card, which lets the poor avail services like medical care for free.
The conversation got me thinking: can I live on just Rs 32 a day? My first response was: no.
So, on Thursday morning, I woke up to the aroma of ginger tea being made in the kitchen by my household help (who makes Rs 200 a day but stays in a chawl) and nobly declined the brew. My wife scowled.
Instead, I legged it to the neibhourhood tea stall and ordered a cutting chai and a boiled egg. The tab: Rs 8. I can pull this off, I told myself. An hour later, I was hungry again. But life around the poverty line does not include multiple breakfasts with eggs and muesli. Virtue and the resolve to write good copy triumphed.
After a bath (in which I shunned soap) and a refusal to spray myself with my Rs 200 deodorant, I pocketed by Rs 9,000 Blackberry and my Hidesign wallet and was ready to face the world.
As soon as I stepped out of the gate of my apartment complex, it hit me. The railway station was two kilometers away and I paid Rs 20 everyday for an auto ride.
More stories from this edition of Sunday ET
- Times of India archives: A Parliamentary Debate on Banning Crosswords
- Rupee swings: How to protect your business margins
- Immigration fraud by US colleges causing worries once again this academic season
- Cocktail Conversations: Sauce vs Ketchup
http://economictimes.indiatimes.com/news/politics/nation/below-poverty-line-can-you-live-a-day-in-mumbai-on-rs-32-find-out/articleshow/10107776.cms
'India remains Russia's client No.1 in arms export'MOSCOW: India continues to be Russia's largest strategic partner in military-technical cooperation, the head of Russian state arms exporter has said.
"India, China, Algeria, Vietnam and Venezuela are our leading partners," CEO of RosoboronexportAnatoly Isaikin told the Kommersant daily, adding that India is "client No.1" for Russia "for years ahead."
He underscored that under the long term military- technical cooperation programme Russia is taking part in various projects, which include joint R&D and joint production.
Isaikin said Russia was currently bidding for 20 tenders floated by India. "Winning at least half of these tenders is huge luck for any state."
He, however, said that failure of MiG-35 in MMRCA tender was "extremely unpleasant and sensitive" for Russia.
Isaikin expressed confidence that Moscow will retain its leading position in the Indian arms market in spite of entry of new players like the US.
The MiG-35 fighter plane turned down by India will be used by the Russian Armed Forces,Rosoboronexport Director-General Anatoly Isaikin said.
The Russian aircraft bid for the USD 10 billion Indian tender for 126 fighter aircraft but was not shortlisted.
Isaikin refused to comment on possible reasons for the tender committee's decision but recalled that "the organisers of the tender set forth strict requirements",Itar-Tass reported.
"A possible reason may be that some of the components used in the MiG-35 - instruments and armaments - which we installed on the plane did not pass state testing," he said.
"The MiG-35 is an excellent plane and it will find its use in the Russian Armed Force," Isaikin added.
18 AUG, 2011, 09.55AM IST, IANS
Sukhoi T-50 fifth generation fighter makes first demonstration flight at the MAKS 2011 International Aviation and Space Show
MOSCOW: Russia's Sukhoi T-50 fifth generation fighter performed its first demonstration flight at an international aviation show Wednesday.Experts at the MAKS 2011 International Aviation and Space Show said the pilots did not performed any acrobatic stunts because the plane was still going through a series of test flights.
It was important for the manufacturers to show that "the plane no longer exists just on paper, but is fleshed out in metal and up in the air".
The T-50, developed under the programme Future Aviation System for Tactical Air Force at Sukhoi, will be the jewel in the Russian air force crown. The service has relied on the Mikoyan MiG-29 and Sukhoi Su-27 family of combat aircraft as the core of its fighter force since the mid-1980s, but these aircraft are seen as approaching obsolescence, officials said.
The T-50 is Russia's first new major combat aircraft designed since the fall of the Soviet Union.
When an operational fighter based on it is put into service, possibly as soon as 2015, it will be the Russian Air Force's first stealth aircraft, featuring low-observable technology that makes it almost impossible to detect with radar.
Like its US counterpart, the F-22 Raptor, it will be able to cruise at supersonic speeds, and be capable of pulling high-G manoeuvres that older aircraft cannot match thanks to thrust-vectoring exhaust nozzles and a hi-tech flight control system.
The T-50 made its first flight at the Komsomolsk-on-Amur factory airfield in Siberia in January, and since then two prototypes have been undergoing flight tests at the Zhukovsky flight test center near Moscow.
25 SEP, 2011, 03.29AM IST, HARI PULAKKAT,ET BUREAU
Elegant scientific theories, techniques being used to analyse messy social conflicts
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Media reports are superficial sources of information for scholarly pursuits, but only when seen through human eyes. Kalev Leetaru, a text analytics specialist at the University of Illinois, put a set of media reports under the penetrating gaze of Nautilus, a supercomputer based at the University of Tennessee. The computer analysed 30 years of data from around the world, containing 100 million news reports, 10 billion names and activities and 100 trillion relationships.
Leetaru was looking for a method to forecast large-scale human behaviour, and he thought he found it at the end of his analysis. He had looked deeply at the tone and frequency of words used in news reports. He was particularly interested in spikes of negative sentiment, which he closely associated with an imminent revolution. He found such sentiments in the days leading up to the recent revolutions in Tunisia, Egypt and Libya. They were no coincidence, according to him. Several other major events - the 1990s ethnic conflict in the Balkans, for example - were also associated with spikes in negative sentiment.
Half a Million DVDs
"People do not wake up on a Friday morning and decide to start a riot," says Leetaru, who is assistant director for text and digital media analytics at the Institute for Computing in the Humanities, Arts, and Social Science at the University of Illinois. "There is a long slide towards such events." The fate of Hosni Mubarak is one of Leetaru's prime exhibits. "Everyone said he would last the revolution because he had lasted 30 years. But analysis showed that this revolution was different."
Leetaru had measured the density of emotional language. Algorithms helped him score words for their emotional weight and then classify them as positive or negative. He also analysed the results in statistical terms and threw up results that looked like a stock price graph. Leetaru could then easily spot the spikes in collective national emotion, which are usually evident before an extreme event takes place.
Leetaru now applies his textual mining skills to understand global social problems. Social science did not have such specialists till recently because the world had no data to analyse. The advent of digitised text and then the social media and Twitter has put in front of computer scientists an enormous amount of information to analyse. And advances in computing technology have given them the ability to analyse this information quickly.
Thirty years worth of media coverage consisted of 2.4 petabytes of data, roughly equal to half a million DVDs or 20 billion pictures, but modern computers can cut through this mountain easily. And such data analysis is now throwing up surprising facts about human behaviour. "Collective human behaviour is more predictable than we thought," says Aaron Clauset, assistant professor of computer science at the University of Colorado in Boulder.
Probability of Another 9/11
Clauset is a computational scientist. Computation is a step ahead of data mining, in that it simulates events and gives predictions and forecasts. Clauset has been analysing a problem that is now on top of everyone's minds: global terrorism. Specifically, he has been using contemporary statistical methods to investigate the probability of big terrorist attacks.
A terrorist attack is as random an event as you can get, and yet Clauset has found patterns over the years that can be used to forecast big ones. "Forecasting is different from prediction," says Clauset. "You can forecast an earthquake but not predict it." Geophysicists forecast earthquakes in terms of probabilities within a specific time window. They can never say that an earthquake will strike a specific place at a specific time, but the forecast can give enough data to prepare a response when it finally strikes. Similarly, Clauset thinks that global terrorism forecasts can help governments to prepare responses for big terrorist attacks.
More stories from this edition of Sunday ET
- Times of India archives: A Parliamentary Debate on Banning Crosswords
- Below poverty line: Can you live a day in Mumbai on Rs 32? Find out!
- Rupee swings: How to protect your business margins
- Immigration fraud by US colleges causing worries once again this academic season
25 SEP, 2011, 02.37AM IST, HEMA RAMAKRISHNAN & ROHINI SINGH,ET BUREAU
Chidambaram finds himself in potentially troubling political environment over 2G scam
Four years ago, a senior finance ministry official walked up to his boss Palaniappan Chidambaram, the then finance minister, and bluntly told him that there was no case for dropping a disciplinary action against an errant taxman. The tax official was facing sanction for prosecution, but some members from the Opposition, including legal luminaries, wanted the minister to go soft on him.
"It was a complex case. The minister asked me for a chronology and built up the case objectively to arrive at the same conclusion as I did. The biggest lesson I learnt from him was to set aside one's own biases and prejudices and take administrative decisions objectively," said the official who did not wish to be named.
Always on the top of his portfolio, home minister Chidambaram is adept at handling such pressures. Once during the Budget, the Tamil film industry lobby, steered by his relative, was lobbying for a duty exemption. Chidambaram handed over their representation to the Budget team, late at night. Next morning, the official advised him to reject their demand. The minister dropped the proposal, but only after poring over the calculations on revenue loss.
Another official recounts how Chidambaram was a disciplinarian and would never defy any decision taken by the prime minister on Budget proposals. "But I have not seen even a secretary in the ministry who is willing to patiently listen to a contrarian view. Also, most ministers, when quizzed about wrong decisions will blame bureaucrats who advised them. The home minister is among the few who can defend his own decision," says the official.
One Note, Many Theories
That attribute - not passing the buck - and those skills - close analysis of a complex issue - as well as his respect for collective responsibility in government may be required and tested as never before - Chidambaram faces a peculiar and potentially troubling political environment.
The now famous 2G note - a letter from Pranab Mukherjee-run finance ministry to the PMO arguing that the then finance minister could have done more on the A Raja-championed spectrum allocation process - may not stand the test of logic: one minister cannot overturn the decision of another minister.
But Chidambaram's potential troubles don't need a logical base. Apart from BJP sniping, there's the issue of whether Chidambaram and Mukherjee share a relationship so fractious and volatile as to land the government in more trouble than it already is in. The two senior ministers have not been known to share a close or friendly relationship. But that's not unusual in politics. What is, is the possibility that such differences at such levels of government may play out, at least partially, in the public.
More stories from this edition of Sunday ET
- Times of India archives: A Parliamentary Debate on Banning Crosswords
- Below poverty line: Can you live a day in Mumbai on Rs 32? Find out!
- Rupee swings: How to protect your business margins
- Immigration fraud by US colleges causing worries once again this academic season
http://economictimes.indiatimes.com/news/politics/nation/chidambaram-finds-himself-in-potentially-troubling-political-environment-over-2g-scam/articleshow/10108397.cms
25 SEP, 2011, 02.40AM IST, JOE A SCARIA,ET BUREAU
Kudankulam Question: Does blueprint for India's nuclear plans face divide between government and 'people's movements'?
Indinthakarai village in Tamil Nadu, bordering Kanyakumari, is some 2,400 km away from the Ramlila Maidan in Delhi, where Anna Hazare undertook his fast. But it was the Anna formula at work here. Work on the Kudankulam nuclear power plant has been halted temporarily, after a 12-day fast by the villagers - Anna's fast lasted for the same number of days.
Kudankulam, if construction is finished, will most likely be the newest nuclear plant in the world. But will it be constructed?
The question assumes importance given that another upcoming nuclear plant at Jaitapur in Maharashtra too faces a storm of protests by locals. A common thread running through both protests is concerns over safety, though people in Jaitapur are also opposing land acquisition.
Kudankulam and Jaitapur put a question mark on the future of nuclear plants in the country. They also raise questions on how the political class will react to what supporters of nuclear plants say is a progressive idea.
For answers, let us first look at how events unfolded in Kudankulam.
The two imposing domes of the nuclear power project of 1,000 mw each have been in the making for years. The protests are about as old. The villagers wonder why their village should be home to a nuclear power plant that puts restrictions on fishing.
Led by local leaders and religious heads, 127 of the villagers drawn from the neighbouring villages, 26 of them women, went on a hunger strike. Soon, thousands of villagers began to stream in from neighbouring districts of Kanyakumari, Nagercoil and Tirunelveli to offer moral support.
The results were quick as they were dramatic. Chief minister J Jayalalithaa, basking in her recent landslide victory in the assembly poll, had been dismissive of the villagers until just a week ago. She had even asked the villagers to call off the strike because "the nuke plant had all the safety precautions". She changed tack overnight. She wrote to the PM to "assuage the feelings of the villagers".
Given that the local body elections in the state are scheduled for October, it is safe to say political compulsions forced the government's hand. The state cabinet resolved to ask the Centre to call a temporary halt to the project.
In front of the 106-year-old Our Lady of Lourdes Church at Idinthakarai where thousands had gathered to support those on hunger strike, the cabinet decision was greeted with wild cheers, and a reiteration that only the battle was won and that the war would go on.
"We are only calling off the hunger strike. We are not going to go home in a hurry on this issue. The protests will continue until the authorities agree to scrap the nuclear power plant in our village," says SP Udayakumar, coordinator of the People's Movement against Nuclear Power.
More stories from this edition of Sunday ET
- Times of India archives: A Parliamentary Debate on Banning Crosswords
- Below poverty line: Can you live a day in Mumbai on Rs 32? Find out!
- Rupee swings: How to protect your business margins
- Immigration fraud by US colleges causing worries once again this academic season
http://economictimes.indiatimes.com/news/news-by-industry/energy/power/kudankulam-question-does-blueprint-for-indias-nuclear-plans-face-divide-between-government-and-peoples-movements/articleshow/10107490.cms
Census findings point to decade of rural distress
P. SAINATHSHARE · COMMENT · PRINT · T+
The HinduFOOTLOOSE NATION: Fatigued migrant workers from Tiroda in Gondia district of Maharashtra journeying on the floor of a train to Nagpur (Rural) looking for work. They are out of their homes 18-20 hours a day. Photo: P. Sainath
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For first time since 1921, India's urban population goes up by more than its rural
Is distress migration on a massive scale responsible for one of the most striking findings of Census 2011: that for the first time since 1921, urban India added more numbers to its population in a decade than rural India did?
At 833.1 million, India's rural population today is 90.6 million higher than it was a decade ago. But the urban population is 91 million higher than it was in 2001. The Census cites three possible causes for the urban population to have risen by more than the rural: 'migration,' 'natural increase' and 'inclusion of new areas as 'urban.' But all three factors applied in earlier decades too, when additions to the rural population far outstripped those to the urban. Why then is the last decade so different? While valid in themselves, these factors cannot fully explain this huge urban increase. More so in a census in which the decadal growth percentage of population records "the sharpest decline since India's independence."
Take the 2001 Census. It showed us that the rural population had grown by more than 113 million since 1991. And the urban by over 68 million. So rural India had added 45 million people more than urban. In 2011, urban India's increase was greater than that of rural India's by nearly half a million, a huge change. The last time the urban increase surpassed the rural was 90 years ago, in 1921. Then, the rural total actually fell by close to three million compared to the 1911 Census.
However, the 1921 Census was unique. The 1918 Influenza epidemic that killed 50-100 million people worldwide, ravaged India. Studies of the 1921 Census data say it records between 11 and 22 million deaths more than would have been normal for that decade. There was also the smaller impact of World War I in which tens of thousands of Indian soldiers died as cannon fodder for Imperial Britain in Europe and elsewhere.
If Influenza left its fatal imprint on the 1921 enumeration, the story behind the numbers of the 2011 Census speaks of another tragedy: the collapse of millions of livelihoods in agriculture and its related occupations. And the ongoing, despair-driven exodus that this sparked in the countryside.
The 2011 Census captures only the tip of an iceberg in terms of rural upheaval. The last time urban India added more numbers to its population than rural India was 90 years ago and that followed giant calamities in public health and war. Yet, without such conditions, urban India added 91 million to its 2001 total, against rural India's 90.6 million. (Table 1). Nor can this reversal be fully captured by the factors Census 2011 cites as driving the urban increase. Take 'migration.' In public debate, 'urban' is often equated with big metros. This conjures images of massive waves of people from villages heading straight for the big metros. And this flow, you will be assured, is falling. (Vital data on this will emerge only next year and might surprise us).
The Census data, however, do not convey the harshness and pain of the millions trapped in "footloose" migrations. That is, the desperate search for work driving poorer people in many directions without a clear final destination. Like Oriya migrants who work some weeks in Raipur. Then a couple of months at brick kilns in Andhra Pradesh. Then at construction sites in diverse towns in Maharashtra. Their hunger, and contractor, drive them to any place where there is work, however brief. There are rural migrations to both metros and non-metro urban areas. To towns and smaller cities. There are also rural to rural migrations. There are urban-urban migrations. And even, in smaller measure, urban to rural migrations.
Flight from agriculture
Neither the Census nor the National Sample Survey is geared to capture the complexity of India's migrations. A migrant in the Census is someone counted at a place other than his or her last place of residence. This records a single move — not multiple migrations. So it sees only the tip of the mobility iceberg, missing footloose migrations altogether. What we do know from Census 2001 is of the flight from agriculture. Between 1991 and 2001, over seven million people for whom cultivation was the main livelihood, quit farming. That is a mind-boggling figure. It suggests that, on average, close to 2,000 people a day abandon farming in the country. Where do they go? Nothing in employment data suggests they get absorbed in decent work in bustling cities.
What about 'natural increase' (the difference between the numbers of births and deaths in a population)? That does not explain the switch around in rural-urban increases either. Indeed, the rate of natural increase has declined in both rural and urban areas. Still the urban population and towns get bigger and bigger.
As Registrar General and Census Commissioner of India Dr. C. Chandramouli puts it: "Fertility has declined across the country. There has been a fall in numbers even in the 0-6 age group, as a proportion of the total population. In fact, in absolute numbers too, this group (now 158.8 million) has declined by five million, compared to the previous Census. This would suggest migrations as a significant factor in urban growth. But what kind of migrations we can only ascertain or comment on when their patterns emerge more clearly. The Census in itself is not structured to capture short-term or footloose migrations."
We also get an extraordinary picture when viewing what demographers call the 'Urban-rural growth differential.' The URGD is simply the difference between the rates at which rural and urban populations expanded in each decade. It is also a rough and ready index of the extent of rural-urban migrations. The URGD in the 2011 Census is 19.8, the highest in 30 years.
'Natural increase' does not then account for the growth in urban numbers. Certainly not for the 30 per cent rise in urban population in the States. Thousands of towns today have far larger populations than they used to have — but not due to natural increase. The reason is migrations on a massive scale. Rural folk still outnumber urban people by more than two to one. In the 2001 Census, rural family size (5.4) remained bigger than urban family size (5.1). Also striking, States like Uttar Pradesh and Bihar show massive falls in growth rates in 2011. In the 2001 Census, Uttar Pradesh and Bihar were "the two States with largest number of net migrants migrating out of the state."
The other factor cited by the current Census for the turnaround is interesting. "Inclusion of new areas under 'Urban'." The number of 'statutory towns' has gone up by a mere 241 since 2001. Compare that with the preceding decade when they rose by 813, or more than three times that number. (A 'Statutory town' is an urban unit with a municipality, corporation, cantonment board or notified town area committee.)
There is, however, a boom in the number of 'Census towns.' In the decade 1991-2001, Census towns actually declined from 1,702 to 1,361. In the 2011 Census, they nearly tripled to 3894. That is stunning (Tables 2 and 3). How did this happen? And what is a 'Census town?' This is a village or other unit declared as a town when: its population crosses 5,000; when the number of male workers in agriculture falls to less than 25 per cent of the total; and where population density is at least 400 per square kilometre.
At the very least, this means the male workforce in agriculture has collapsed in thousands of villages, falling to less than a quarter of all workers. So the farm exodus continues. What might the 2011 data on cultivators show us when it is out late next year? It could show us that the numbers quitting cultivation since 2001 might equal or exceed the over seven million dropouts of the previous decade.
Next: Decadal journeys: Debt and despair spur urban growth
Keywords: rural distress, census findings, Census 2011, National Sample Survey, migrant workers, agricultural sector, growth rates, Urban-rural growth differential, URGD
http://www.thehindu.com/opinion/columns/sainath/article2484996.ece?homepage=trueAn external borrowing spree
C. P. CHANDRASEKHARSHARE · PRINT · T+
The Indian corporate sector appears to have stepped up its borrowing from the international market. Monthly figures on private external commercial borrowing (ECB) released by the Reserve Bank of India point to a significant increase in in the volume of such borrowing. As compared with a total of $12.2 billion borrowed over the six months ending January 2011, external borrowing over the subsequent six months (ending July 2011) had touched $19.3 billion. Moreover, underlying month-to-month variations in the volume of borrowing because of the presence or absence of large individual borrowers, is a trend pointing to a continuous rise. As a result, while the current ceiling on ECB is $30 billion in a single financial year, Indian companies have already borrowed close to $16 billion over the first five months (April-August) of this financial year (2011-12).
What is noteworthy is that the recent increase in borrowing has been accompanied by an increase in the trade and current account deficits on India's balance of payments and signs of a weakening of the Indian rupee vis-à-vis the dollar. As argued below, both of these have implications for an assessment of the implications of the increase in external commercial borrowing.
The obvious cause for the close to 60 per cent surge in ECB over the last two six month periods for which data is available is the sharp rise in domestic interest rates. The Reserve Bank of India has announced 12 increases in reference rates since March last year, raising the cost of credit provided to the banking system by 3.25 percentage points to 8.25 per cent. This being the rates at which banks can borrow from the RBI, they in turn are charging higher rates on loans to their clients. In the event, there has been a widening of interest rates payable on borrowing from the domestic and external markets, with the latter being the cheaper source. When the differentials in interest rates between external and domestic markets widen, the normal tendency would be for firms to borrow abroad to meet even their domestic expenditures and finance their expansion plans targeted at the domestic market.
There are, however, two much-discussed dangers associated with this tendency. First, there arises a mismatch between the currency in which debt service commitments on external loans must be met and the currency in which revenues are garnered from the domestic market-oriented activities that are financed by such loans. Hence, a part of the foreign exchange earned or acquired in other activities would have to be diverted to these borrowers in the future so that they can meet their debt service commitments. This could put some strain on the balance of payments.
The second problem is that the borrowers themselves are taking on substantial exchange rate risks. While they may be obtaining finance at interest rates lower than currently charged in the domestic market, their debt service commitments in rupee terms can rise sharply if there is a depreciation of the domestic currency. This could more than neutralise the benefit of an interest rate differential.
Besides these factors, another possibility is a rise in in rates in international markets. Those interest rates are low now because central banks in the developed countries have pumped large volumes of cheap liquidity into the market in response to the crisis. But there is no guarantee that the era of access to cheap liquidity for emerging markets will continue, as illustrated by the difficulties being faced by the peripheral countries in the Eurozone. If rates rise, efforts to refinance maturing debt would require expensive borrowing. Put all of this together, and the rise in external borrowing increases the vulnerability of the corporate sector and the nation.
It is for these reasons that the widening of the current account deficit on India's balance of payments and the weakening of the rupee against the dollar at a time when external commercial borrowing is rising give cause for concern. Faced with such a situation the government should seek to limit external borrowing to instances where access to foreign exchange is socially important, as for example when capital goods have to be imported for crucial infrastructural projects.
However, the government appears to be inclined towards loosening rules with respect to external borrowing, to dampen corporate criticism of the high interest rate regime. Under pressure from the corporate sector, the government had increased in May the ceiling it sets on total external commercial borrowing in a single financial year by $10 billion to $30 billion. More recently, the government has increased the cap on borrowing by individual firms in the microfinance, services and infrastructure (and other) sectors (for loans with maturity of more than 5 years under the automatic route) from $5 million, $100 million and $500 million respectively to $10 million, $200 million and $750 million. Moreover, the government has been permitting the use of ECBs for refinancing rupee loans. Telecom companies who borrowed in rupees at high cost to finance spectrum acquisition have exploited this facility substantially.
http://www.thehindu.com/opinion/columns/Chandrasekhar/article2472556.ece
Thus, while retail borrowers are experiencing sharp increases in the equated monthly instalments or the tenure of the loans they took on to finance housing investments or purchases of automobile and durables, corporates are being offered an escape to cheap credit through means that increase external vulnerability. This quirky policy is clearly aimed at neutralising the impact of interest rate hikes in the domestic market on the corporate sector, so as to dampen criticism of the government's mismanagement of inflation control and the failure of its policy of relying solely on interest rate increases to rein in prices.
There are conspiracy theories doing the rounds. Rumour has it that there is a standoff between the Ministry of Finance and the Reserve Bank of India over interest rate policy. The government seems completely at a loss to find ways of reining in inflation. Rather it is worsening the inflation problem through periodic hikes in administered prices, especially that of petroleum. This has forced the central bank to take on the burden of combatting inflation leading to the sharp rise in interest rates. But the Finance Ministry does not seem to like that either, and is using the ECB lever to counter the impact of the RBI's intervention on the powerful corporate sector. But that could increase external vulnerability, which could be the next source of conflict between these two agencies.
Keywords: external commercial borrowing, RBI, ECB
Sonia Gandhi among world's 50 most influential people
London: United Progressive Alliance (UPA) chairperson Sonia Gandhi and industrialist Ratan Tata were among the world's "50 most influential people" along with German Chancellor Angel Merkel, who was ranked No 1, according to a survey by UK-based magazine NewStatesman.
- 33%67%
The list, however, features a number of controversial figures including the chief of the Pakistan Army Gen Ashfaq, Parvez Kayani, the Republican Tea Party leader Michele Bachmann, described as "scarier than Sarah Palin" and al Qaeda's "spiritual leader" Anwar al-Awlaki.
Describing Gandhi as "Madam India", the survey included the Congress president in the list for the political power she wields as much as her capacity as the chairperson of the ruling UPA.
"Italian-born Sonia Gandhi is widely considered as one of the most powerful politicians in India, becoming the longest-serving president in the history of the Indian National Congress on being re-elected for the fourth time in September 2010," the magazine said highlighting the fact that she is daughter-in-law of former Prime Minister Indira Gandhi.
Tata, dubbed as "Metal Head", was hailed as a symbol of "India's emergence as an international powerhouse" and credited with giving Indian business a global reach with the acquisition of the British steel manufacturer Corus and the prestigious Jaguar Land Rover car by the Tata Group.
His statement that his successor need not be an Indian is described as a "sign that his is a truly global business."
Source: PTI
The first poll test for Mamata in Kolkata
Kolkata: Polling began for the by-polls to Bhowanipur and Basirhar North Assembly constituencies in West Bengal amid tight security this morning.
Trinamool Congress chief Mamata Banerjee, who resigned from her Parliament membership to take over as West Bengal chief minister, is locked in a six-cornered contest in Bhowanipore.
But it will effectively be a contest between Banerjee and Nandini Mukherjee of the CPI(M) which was routed in the recent Assembly elections after over three decades of power in the state.
As many as 2.12 lakh voters in Bhowanipur will cast their votes in 264 polling stations while 1.93 lakh voters will exercise their franchise in 239 polling stations in Basirhat North seat, state Chief Electoral Officer Sunil Gupta said.
Steady streams of voters were seen in front of the booths in Bhowanipore.
Trinamool Congress candidate A T M Abdullah is locked in a four-cornered contest in Basirhat North with CPI(M)'s Subid Ali Gazi being his principal opponent.
Gupta said central forces have been deployed in all polling stations and polling premises, while multi-tier security rings have been arranged.
Along with the central forces, personnel of West Bengal Police and Kolkata Police would be deployed in their respective areas, he said.
While Bhowanipur seat fell vacant following the resignation of its sitting legislator Subrata Bakshi of Trinamool Congress, by-election to Basirhat North seat is being held owing to the death of its MLA, CPI(M)'s Mustafa Bin Qasem.
Source: PTI
Glad US links ISI, Haqqani network: Krishna
New York: India today said it was good that the US recognised the link between the Haqqani network and the Pakistan intelligence agency ISI, both of which have been blamed for the assassination of former Afghan President Burhanudin Rabbani.
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"We have always been saying it. I am glad US finds it is also suffered under the ISI," External Affairs Minister S M Krishna said here.
The two countries will discuss their bilateral relationship when Krishna meets Secretary of State Hillary Clinton tomorrow. Krishna said it was fine to differ with the US on issues like Syria and Libya, noting that bilateral relations depended on entirely different set of conditions.
"We don't have to agree on everything," he said.
Referring to support of nations like China in India's bid for permanent membership of the Security Council, Krishna said "this is a question which India is very serious about."
He noted that the restructuring of the UNSC will be a long and arduous journey. "But India believes that ultimately it will find its rightful place in the Security Council," he added.
Krishna met the Indian Ambassador and its Consul Generals in the country and discussed ways to improve the consular services and deal with public grievances.
Source: PTI
2G controversy: Pranab to meet PM Sunday
Finance Minister Pranab Mukherjee, who is in Washington, is coming here Sunday to meet Prime Minister Manmohan Singh in the wake of a controversy over the role of Home Minister P. Chidambaram in the allocation of 2G spectrum.
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Mukherjee is in Washington to attend the World Bank-IMF meetings over the weekend. He was scheduled to fly back home Sunday, but changed his plans in view of the controversy, according to diplomatic sources.
He is also scheduled to address the media in Washington later Friday instead of Sunday as planned earlier, but he is unlikely to speak about the finance ministry note on the second generation (2G) spectrum case to the Prime Minister's Office.
In New York, Mukherjee had Wednesday acknowledged the existence of the March note saying the airwaves could have been auctioned in 2008 if Chidambaram, the then finance minister, had "stuck to his stand".
He, however, avoided direct comment on the note from his ministry saying the matter was sub-judice.
In the note, the finance ministry says Chidambaram, one of the government's most high-profile ministers, could have prevented spectrum from being given away at throwaway prices by insisting on its auction -- implying that presumptive losses worth thousands of crores could have thus been avoided.
The note, which was apparently shown to Mukherjee and accessed by an application under the Right to Information Act, was prepared by a deputy secretary in the finance ministry and sent to the Prime Minister's Office March 25.
Manmohan Singh and Mukherjee, called up Chidambaram over the controversy Wednesday night and were assured that he will not speak on the issue till their return.
Source: IANS
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