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Friday, July 25, 2008

Global economy, national problems, petty politicians

 
 
"Power will go to the hands of rascals, rogues and freebooters. All
Indian leaders will be of low calibre and men of straw." -- Winston
Churchill on the eve of Indian Independence

The recent happenings, in the run up to the confidence vote and in
Parliament, exposed the soft underbelly of Indian democracy. Perhaps
no other democracy anywhere else in the world at any point in history
is witness to such bizarre events. Surely, Winston Churchill's ghost
continues to haunt us. Often one wonders whether he was a mystic, for
who else could be so prophetic?

First, let us seek to understand the overall picture of the nation.
Indian economy is fast emerging as the new shining star, as it
increasingly gets integrated with the global economy. Never in the
recorded history of mankind has a democracy of India's size and
complexity consistently grown in excess of over 6 per cent per annum
for so long.

This is indeed possible thanks to the sustained hard work of Indian
entrepreneurs, the genius of Indian businessmen and the overarching
discipline of Indian families. It is our democracy and the complete
reliance on domestic capital that makes India's growth story that much
more spectacular when compared to that of China or any other country.

But what stands out till date despite the brouhaha over the
liberalisation policies of the government is that this growth has been
sustained by the economy in spite of our governments, not because of
them. In effect governments, both at the state and the Centre,
continue to interfere in business when they shouldn't; charge
exorbitant taxes and collect them in a Draconian manner only to render
abysmal standards of governance.

Paradoxical as it may seem, despite its modest success story, India
continues to be plagued by age-old problems. These are pan-Indian
issues that remain fossilised in time. It would seem that nothing has
changed in India with regard to some of the fundamental indices of the
human development index -- especially with regard to issues concerning
literacy, health, infrastructure, water and malnutrition.

While smaller and less-endowed countries, especially in Asia, have
dramatically improved the living standards of their citizens and are
now seen as developed countries, India continues to sport the
'developing' tag. And it is here that the role of a strong polity with
good governance comes into play, especially in the global context.

What accentuates these national problems is that for the past two
decades or so Indian polity has seen a spectacular rise of the
regional and sub-regional parties. Thanks to a lax Constitutional
mechanism, these regional and sub-regional parties have been allowed
not only to dominate electoral politics at the regional level, they
have come to occupy national centrestage too.

While on first brush it did empower the hitherto unrepresented castes
and communities, it exposed the serious flaws in our Constitution, so
much so that one suspects the Constitution is under siege by its own
liberal approach. What ideally begins as a call for getting increasing
representation by such leaders claiming to represent a caste or
community invariably seems to end up sustaining one man and one
family.

Naturally, the idea is to become the leader of a caste or a community
having presence perhaps in three or four districts of a state. That
enables you to have three or four MPs (or 10-20 MLAs) --
euphemistically called auto-rickshaw parties. In a scenario where no
party is able to get more than one-fourth of the total seats in
Parliament, it provides an ideal situation to these parties to hijack
democracy lock, stock and barrel.

So the picture is complete: a resurgent India continues to be
bedevilled by age-old problems and by a polity that, instead of
providing solutions, is primarily engrossed in the loot of public
resources.

It churns my innards that we have inadvertently proved Churchill fully
correct, all in a matter of sixty years. That explains the sense of
despair despite impressive economic gains in the country.

'We vote our castes, not cast our votes'

The former Election Commissioner T N Seshan is credited for coining
this colourful statement. In the process he has captured the entire
paradigm succinctly. Most of our regional parties have perfected the
art of playing on the emotions of our people by sharpening the fault
lines on the basis of language, caste, community, race, religion or
anything that could be use to divide people.

Elections after elections have proved that only those who are
shriller, more vociferous and abusive continue to have electoral
successes. And a cursory glance at those regional parties that have
survived ten years in electoral politics has clearly demonstrated that
such parties invariably get dominated by one individual, one family.

And why not? Readers may well know that only 50-60 per cent of the
voters turn up to exercise their franchise. Most candidates get
elected by getting a mere 30-35 per cent of the popular vote. In
effect, a person getting a positive acceptance of a mere 18-20 per
cent of the voters can entertain chances of winning.

No wonder, the inclination to appeal to the lower denomination rather
than the higher. What better way of doing that than by appealing to
one's own caste or community? Remember, one has to target a mere 20
per cent of the voters in a constituency to get elected. Once elected,
the perks of office, the momentum sustained through pelf and nepotism,
carry one through his term in office.

In the interregnum, should there be any danger to the leader of the
party, the standard operating procedure is to raise the same issues
once more, with one small exception -- make it even more shrill,
titillating and provocative. In the process, these leaders have
perfected the art of converting every crisis into an electoral
advantage.

But what is the solution?

DMK, PMK, Akali Dal, BJD, RJD, JD(S), Samajwadi Party, Lok Dal, Telugu
Desam, JMM, NC, PDP, etc are examples that easily come to mind where
it is a case of one individual, one family. In the case of the AIADMK,
TC and BSP, it is the case of one individual alone. Yet it is such
parties that are controlling the levers of power.

Written in the aftermath of the Independence movement, the framers of
our Constitution surely would not have envisaged this ugly situation
wherein Indian democracy is hostage to a few families and individuals.
The obvious answer is to re-look at the Constitution to ensure precise
balance between rights of smaller groups as well supreme national
interests.

What is the relevance, say, of the nuclear deal or capital account
convertibility to the MDMK or the PDP or the AGP, except to leverage
their power to the maximum? God forbid, what would be the attitude of
these parties if India becomes a permanent member of the United
Nations and confronts some tough international choices?

It is in this connection that scholars, sociologists and
Constitutional experts have suggested that a presidential form of
government, with appropriate checks and balances, is far better suited
to the Indian conditions. According to these experts, a presidential
form of government would encourage candidates to appeal to a wider
canvas of voters than from the narrow confines of caste of community.

But the presidential form of government is merely illustrative.
Another idea that has gained currency is that only political parties
with an aggregate vote share beyond a prescribed limit in the state
elections must be allowed to contest for the Lok Sabha.

Much as these parties swear by democracy, any talk of revisiting some
of the provisions of the Constitution is frowned upon by these vested
interests..

The middle class comprising ordinary Indians, who are the source of
India's strength, has been a victim of all this. For too long it has
concentrated on economics hoping that things will take care of
themselves on the political front. In fact, it hopes that it is the
polity that would be the harbinger of such change.

Thanks to the vested interest embedded in the system, it would be
juvenile to believe that our political parties would themselves
initiate the change.

But we have reached a point that any further economic progress will
invariably depend on reforms -- not in our economic policies but in
our political process. Else we run the risk of doing away with all the
gains of six decades after Independence.

And it is the Indian middle class that needs to become the instrument
of change. Remember it is we, the ordinary people, who have the
responsibility of proving Churchill wrong. The political parties have
already proved him right.

 


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Why the PM must focus on education reforms

 
 
 
The typical window of reform opportunity is early in a government's
tenure. Having squandered the "honeymoon" period and beyond, the UPA
government and Dr Singh personally find themselves empowered late in
life.

The question now is this: assuming that Dr Singh has acquired some
political coinage, what should it be expended on? Or, what economic
reforms should this government push with about nine months left to
govern?
Somewhat paradoxically, Dr Singh should - for reasons related to
legacy and conviction - aim for ambitious rather than modest reforms.
Shoring up his legacy requires a big entry on the credit side of the
legacy balance sheet to offset the sizable accumulations -  of
stumbles, inaction, and reversals - on the debit side over these last
three years.

Moreover, the Prime Minister appears to have asserted his power and
presence, albeit for the first time and belatedly, more out of
conviction than electoral expediency: nobody seriously entertains the
thought that the next election will be affected by the 123 agreement.

Having acted out of conviction this time, it seems only natural for Dr
Singh to continue in this vein, especially since his convictions on
economic issues must surely run deeper than on nukes. And a collateral
benefit of acting with ambition may well be electoral: if sufficiently
ambitious reforms are implemented, this government could possibly
dispel some of the aura of bumbling ineffectiveness that has clouded
its tenure.

Conventional wisdom, however, points in the direction of other reform
strategies. One such strategy is to focus on those reforms that would
maximise this government's electoral prospects.

The one economic issue that could resonate with voters is reducing
inflation, and here it is not clear what levers the government can
pull - short of a Volcker-esque monetary tightening - that could bring
timely relief to influence the election outcome.

Another, not mutually exclusive strategy, and indeed one that the
Ministry of Finance is gearing up for, is to bring to legislative
culmination those initiatives that are already in the pipeline.

This strategy would result mainly in financial sector reforms -
increasing the FDI limits in insurance, revamping the pension system,
and reducing public participation in the banking sector - as these
have seen the most preparatory effort these last few years.

But the desirable (tackling inflation) is probably infeasible. And the
feasible (financial sector reforms) is not ambitious enough for the
current circumstances and risks squandering, yet again, the Prime
Minister's political capital.

There is, however, an alternative, ambitious possibility. Economic and
political decentralisation, combined with the rise of coalition
politics, has sharply reduced the central government's domain of
economic influence.

But the one area where it retains influence - or rather strangling
control with disastrous economic consequences - is higher education.
This last bastion of the licence-quota-permit raj is crying out for
reform.

There is political, administrative and regulatory interference in
virtually every aspect of higher education, be it admissions policies,
internal organisation, fees and salaries, and the structure of courses
and funding. In higher education, deregulation, liberalisation, and
globalisation are the way forward.

There may well be a continuing role for state provision, and
especially state funding, of higher education, but a much greater role
and freedom for the private sector are both desirable and unavoidable.

Reforming higher education will not be easy. First, the human capital
resources that educational institutions will need to draw upon for
teaching and research are globally mobile, posing severe challenges to
India's ability to attract and retain these resources.

Unfilled faculty positions - up to 30-40 per cent even in our premier
educational institutions such as the IITs - demonstrate how difficult
it will be to create quality educational institutions on the scale
that India needs..

Second, there are few clear analytical criteria to the central
question of what is "good" higher education. Consequently, a system
that emphasises diversity, flexibility and experimentation (and a lot
of failure) - never the government's comparative advantage - is in the
long run most likely to succeed.

But creating such a system will require as a first and necessary step
breaking the stranglehold of regulatory bodies such as the UGC and
AICTE, which have managed to restrict private sector entry into higher
education.

Within the next few months, Dr Singh should focus all his energies and
political capital on passing legislation that would create the
conditions for liberating the sector from the clutches of the vested
interests, and establishing the right of private sector entry,
domestic and foreign. Of course, there must be sufficient checks to
ensure that the sector attracts quality institutions rather than
hucksters.

Improving higher education is the key to India's growth prospects. The
"Precocious India" development model is based on leveraging skilled
labour, which is increasingly becoming a binding constraint and the
decade-long double-digit skilled wage increases are the flashing amber
signs of serious scarcity ahead.

But higher education is also amongst the most difficult to reform.
Vested interests oppose reforms but they are not unique to education.
The real difference relates to political economy: the pressure for
change from below is particularly weak in this sector.

Financial sector reforms will always have their moneyed, articulate,
influential, and sometimes over-the-top, champions. Roads too will
eventually get built because the middle class, having acquired cars,
will not tolerate keeping them idle. But "exit" by the influential
rich and middle class, who increasingly send their children abroad or
to private institutions, has attenuated the pressure for reform in
education.

Reform in this sector needs an external hand, the hand of an
enlightened leader with the vision to recognise the importance of
education, the will and capital to take on the vested interests, and
the perspective to accept that results will take a long time coming.

The transformation of Dr Manmohan Singh's image from that of a weak,
hobbled leader to an effective, crafty tactician has been striking. In
one go, he increased his leverage vis-�-vis Sonia Gandhi,
outmanoeuvred the Communists, and forced the BJP onto the backfoot.

It is time to deploy these newly honed skills to outwit the one
politician who has repeatedly stymied him, and that too on matters so
apparently dear to his heart. Mr Prime Minister, how about meting out
the Prakash Karat treatment to Arjun Singh?

 


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Grasim Q1 net up at Rs 672 cr


 
 
Mumbai: Grasim Industries today reported a marginal increase in
consolidated net profit at Rs 672 crore for the first quarter ended
June 30, 2008, as against Rs 670 crore in the corresponding period
previous year.

According to a release issued to the Bombay Stock Exchange here today,
the net revenue increased by 9 per cent to Rs 4,430 crore from Rs
4,060 crore in the quarter ended June 30, 2007.

The escalation in fuel prices and bunching of capacity expected in the
next couple of years based on announced plans, are expected to impact
the margins of the company's cement business, the release said.

However, the additional volumes arising from the new capacities, which
will become operational during the current year, should compensate for
the decline in margins, it said.

Further, the impetus on development of infrastructure by the
government should bode well for the cement business in the long term,
the release added.



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Tata Power Q1 net up at Rs 190 cr


 
 
 Mumbai: Tata Power Co Ltd Friday announced a net profit $47.63
million (Rs 190 crore) during the first quarter this fiscal, compared
to $47.5 million (Rs 190 crore) in the corresponding period the
previous year.

Tata Power takes 26% in Bhutan power project | Tata Power may divest
assets, holdings to part-finance capex

For the latest quarter ending June 30, the total revenues increased to
$518.61 million (Rs 2074 crore) from $394.98 million (Rs 1579 crore)
in the corresponding quarter last year.

According to Tata Power managing director Prasad R.. Menon, "one of the
key milestones" for the company was the Supreme Court upholding the
company's distribution rights in Mumbai. "We have been doing this
since nine decades,"

 


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Reliance Power Q1 net at Rs 61.22 cr

 
 
Mumbai: Reliance Power on Friday reported a consolidated net profit of
Rs 61.22 crore ($14.5 million) on total income of Rs 80.55 crore in
the quarter to June 2008.

Comparable year-ago numbers were not available for the company, which
listed in February. Reliance Power raised $3 billion in India's
largest initial public offering in January.

 


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Thursday, July 24, 2008

India Jul 12 WPI inflation 11.89% vs 11.91% wk earlier

 
 
India Jul 12 WPI inflation 11.89% vs 11.91% wk earlier
Thursday, Jul 24
 

   India's headline inflation fell marginally to 11.89% for the week
ended Jul 12 from a 13-year-high of 11.91% in the previous week, the
commerce and industry ministry said today.

    This is the first time in seven weeks that the inflation rate is
down from a week earlier.

    The fall in inflation rate is mainly on account of a high base
effect.

    In the week ended Jul 12, index for all commodities rose 0.1% to
239.0 from 238.7 a week earlier. The all commodities index had risen
0.1% on week to 213.6 in the corresponding week last year..
 

    The inflation rate was 4.76% a year ago.



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Wednesday, July 23, 2008

Consumer Forum directs Nokia to refund price

 
 
The district consumer forum has ordered the Nokia, a mobile company,
to refund Rs 10,100 as cost of faulty mobile set purchased by a
consumer of the city.



The forum also imposed a penalty of Rs 2,000, while directing the
company to pay Rs 1,000 as the litigation cost to the consumer.


The complainant Balraj Singh had purchased a mobile set from the
Mobile Clinic situated in Green Mart Complex Model Town Jalandhar on
October 27, 2006. The mobile started giving problems after some months
and Balraj took the faulty mobile for repair to Alibaba Video Centre
situated on Nakodar Road as per the instruction of Mobile Clinic..


The fault repaired by Service centre resurfaced in June 2007 and the
same set was sent to Chandigarh by the service station for repair and
was returned to Balraj after one month. On August 20, 2007 the set
again started giving problem with same fault and the persons at
service centre misbehaved with Balraj's wife by throwing away the
mobile set when she took the same for repair.


In his judgment, district consumer forum president M M Bhalla
directed, Nokia, its local dealer Mobile Clinic and its service
station to refund the price of the mobile tune to Rs. 10100 to Balraj
and also directed all the three to pay Rs 2,000 as the compensation to
the complainent and Rs 1,000 as the cost to the litigation.

Source: Economic Times
 
 


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Govt to push ahead with economic reforms: FM


 

 

 

Finance Minister P Chidambaram said on Tuesday that the Government
will now push ahead with the unfinished economic reforms agenda after
its victory in the confidence vote.


"With 275 votes, this government has an absolute majority and this is
a confidence to go forward," P Chidambaram said after the trust vote
on Tuesday.


Crucial legislations in insurance and banking sectors and bills for
setting up of a pension regulatory body and one for unorganised sector
had been pending following opposition from the Left parties that were
till recently providing outside support to the UPA Government.


"The Government will be approaching other members who are not opposed
to economic and social reforms and so we will move ahead with the
reforms," Chidambaram said.


"Now we have crossed a major bridge that is the Indo-US civilian
nuclear deal. Now, we will move ahead on economic and social reforms,"
he said.

N.Sukumar
Research Analyst

 

 



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Tuesday, July 22, 2008

IT returns: Special camps for salaried taxpayers



New Delhi, July 21 The Income-Tax Department will organise special
camps in Delhi beginning Tuesday to facilitate salaried taxpayers to
file their income-tax returns. All salaried returns are to be filed
with the Department by July 31.

The first of the two special camps will be held from July 22-25 at
Mayur Bhavan and the second one would be at Pragati Maidan from July
28-31, said a senior IT department official.

Ms Lakshmi Prasad, Chief Commissioner of Income Tax, looking after
salaries, told reporters here that there would not be any extension of
the due date of July 31. She also said that the Tax Department was
geared up to tackle the last minute rush.

"We have seen in the past that though the last date for filing is well
known, there is tendency among taxpayers to file their return in the
last week. More than half the returns are filed only in the last week
of July. We are organising these special camps to ensure smooth filing
of returns and in hassle-free manner," she said.

The Income-Tax Department expects to receive 4 lakh returns at the
special camp at Pragati Maidan. The Delhi region has 7.5 lakh income-
tax assessees who are required to file returns annually. Last year,
for assessment year 2007-08, the Tax Department received 3.44 lakh
salaried returns at its special camp in Pragati Maidan.

Meanwhile, Ms Lakshmi advised salaried taxpayers to mention the Tax
Deduction Account Number (TAS) of the employer/tax deductor in their
returns filed with the Department. Besides permanent account number
(PAN), present and complete postal address, bank account number, name
of bank and branch, MICR code, it is also necessary to mention TAN of
the employer.

"Now we have dispensed with attaching Form 16. So to have authenticity
about tax payment, it is essential that you (taxpayer) mention TAN so
that it can be linked up with the tax deductor. The TAN of the
employer is given in Form 16," she said.

Source: Business Line
 
 
 

SEBI passes consent order in Polaris, Anagram case




The Securities and Exchange Board of India has, through a consent
order on Monday, disposed of proceedings against Mr Arun Jain, CMD of
Polaris Software Labs, for alleged insider trading charges involving
shares of the company during the period between August 28 and October
3, 2000.

This order came after Mr Jain proposed to pay Rs 7 lakh in revised
consent terms for settlement on February 15, 2008 and the Madras High
Court on June 11, 2008, dismissed a writ petition by Mr Jain.

In March, Mr Jain had paid the amount for settlement charges and legal
expenses. The SEBI consent proceedings do not require the person or
the entity on which a show cause notice has been filed to admit or
deny the charges.

In another consent order, issued on Monday by the regulator,
adjudication proceedings against Anagram Stockbroking were disposed
of. Anagram under consent term paid Rs 10,000 to settle the matter.

The SEBI had alleged that the broking firm had acted as a financier to
the key operators involved in the 2003-2005 IPO scam.

The operators had opened many demat accounts in fictitious and benami
names and made large number of applications in the IPOs in the
category reserved for the retail investors.

Source: Business Line
 
 

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