1. The proposed program of the Government of the United States to purchase assets and
equity from financial institutions in order to strengthen its crumbling financial sector has been named as________.
(a) Funding Strategies for Troubled Assets
(b) Troubled Asset Relief Program
(c) Financial Sector Stress Test Program
(d) Fiscal Stimulus and Asset Relief program
2. Which of the following is NOT a subsidiary or joint venture of the multinational
conglomerate Tata Group?
(a) Infiniti Retail (b) North Delhi Power
(c) Titan Industries (d) Bharati Shipyard
3. The type of influenza virus causing the deadly Swine Flu that is paralyzing societies and economies across the world is
(a) A (H1N1) (b) A (H5N1)
(c) Influenza B (d) A (H2N2)
4. In a recent list of 'America's Best CEOs’ for 2009, compiled by the Institutional Investor magazine, three Chief Executives of Indian origin have found a place – Indra Nooyi (Pepsico), Francisco D’souza (Cognizant Technology Solutions) and Ramani Ayer. Ayer is the CEO and President of:
(a) Hartford Financial Services (b) Aflac Insurance
(c) Cisco Systems Inc (d) ADP (Automatic Data Processing)
5. Italian carmaker Fiat is now ready to takeover bankrupt US auto major Chrysler.
Which of the following auto brands is also being considered by Fiat for prospective
acquisition?
(a) Skoda (b) BMW
(c) Opel (d) Escort
6. The neighbouring country, Nepal witnessed political turmoil yet again following the resignation of Prime Minister Prachanda. His resignation came in as a protest against the reinstatement (by the President) of the Army Chief, who had been sacked by the government for his unwillingness to recruit soldiers from the ranks of the former Maoist army. Name the Army General.
(a) Rookmangud Katawal (b) Pushpa Kamal Dahal
(c) Ram Baran Yadav (d) Girija Koirala
7. Team Chennai Super kings playing in the IPL 2009 Cricket Tournament is owned
by_______.
(a) Shahrukh Khan (b) Shilpa Shetty
(c) India Cements (d) GMR Group
8. The Chief Minister of Bihar, Nitish Kumar belongs to which of the following party?
(a) Samajwadi Party (b) Janata Dal (U)
(c) Rashtriya Lok Dal (d) Telugu Desam Party
9. Name the famous military leader whose novel “Clisson et Eugénie” is all set to be
released in English and will reveal a less-known romantic side of a personality known
for his territorial and political leadership.
(a) Adolf Hitler (b) Charles de Gaulle
(c) Francisco Franco (d) Napoleon Bonaparte
10. Name the Indian Chief Executive who had been honoured with a CBE (Commander
of the Order of the British Empire) by Queen Elizabeth II for his contribution to Indo-British economic relations.
(a) Kris Gopalakrishnan (b) Aditya Puri
(c) Mukesh Ambani (d) S Ramadorai
11. This is a brand of automobiles first produced in 1926, and sold in the United States, Canada and Mexico by General Motors (GM), marketed as an "athletic" brand
specializing in mainstream performance vehicles. Amid ongoing financial problems
and restructuring efforts, GM announced that it would phase out the brand by the end
of 2010. Name the brand.
(a) Pontiac (b) Cadillac
(c) Buick (d) Gmc
12. Which of the following bank has received Asian Banker’s award for best retail bank
in the year 2008?
(a) UTI (b) IDBI
(c) ICICI (d) HDFC
13. The world’s top cell phone maker Nokia has launched a new store to compete with
Apple’s hugely successful App store, which will have over 20000 application items
that can run on Nokia phones. What is the name of the store?
(a) Nokia Ovi (b) Nokia Nook
(c) NokStore (d) Nokia Digitization
14. Who is the Managing Director of the International Monetary Fund (IMF)?
(a) Pascal Lamy (b) Dominique Strauss-Kahn
(c) Koichiro Matsuura (d) Ban ki Moon
15. There are three Indians on a recent list of ‘most influential people on the planet’ released by Time Magazine in April 2009. Who among the following is NOT on the aforementioned list?
(a) Sonia Gandhi (b) Ronnie Screwvala
(c) Ratan Tata (d) Narayana Murthy
Answer Key
1.( b) 2.( d) 3.( a) 4.( a) 5.( c) 6.( a) 7.( c) 8.( b) 9.( d) 10.( d)
11.( a) 12.( d) 13.( a) 14.( b) 15.( d)
Friday, February 4, 2011
DLF PROMOTERS RAISE RS 3860 CRORE BY SELLING 10% STAKE
The money raised will be used to buy back DE Shaw stake in DLF Assets ad also to invest in DLF Assets. Promoters of the country’s largest real estate firm DLF Ltd have sold shares worth Rs 3,860 crore ($780 million) representing 9.9% to
institutional investors in the open market. The funds raised will be pumped into another privately held realty firm DLF Assets Ltd (DAL), which owes
the public listed firm around Rs 4,900 crore ($1 billion). DLF Assets purchases commercial properties from DLF and leases them out.
The transaction was done at a price of Rs 230 per share, a discount of 2.6% to the previous day's closing price. It was executed by Deutsche Bank and JP Morgan. More importantly, this could boost the share price as the free float has gone up from 11.4% to 21.3% which would bring in new investors in the company.
After this transaction promoters holding will go down from 88.6% to 78.7%. DLF, Vice
Chairman, Rajiv Singh, has said that the promoters are not looking to dilute any more holding in the near future.
Details of who were the buyers in the deal is not available yet but large existing institutional shareholders of DLF-- Capital International Fund, HSBC Holdings and Fidelity were among those who picked the stake.
institutional investors in the open market. The funds raised will be pumped into another privately held realty firm DLF Assets Ltd (DAL), which owes
the public listed firm around Rs 4,900 crore ($1 billion). DLF Assets purchases commercial properties from DLF and leases them out.
The transaction was done at a price of Rs 230 per share, a discount of 2.6% to the previous day's closing price. It was executed by Deutsche Bank and JP Morgan. More importantly, this could boost the share price as the free float has gone up from 11.4% to 21.3% which would bring in new investors in the company.
After this transaction promoters holding will go down from 88.6% to 78.7%. DLF, Vice
Chairman, Rajiv Singh, has said that the promoters are not looking to dilute any more holding in the near future.
Details of who were the buyers in the deal is not available yet but large existing institutional shareholders of DLF-- Capital International Fund, HSBC Holdings and Fidelity were among those who picked the stake.
DLF PROMOTERS RAISE RS 3860 CRORE BY SELLING 10
The money raised will be used to buy back DE Shaw stake in DLF Assets ad also to invest in DLF Assets. Promoters of the country’s largest real estate firm DLF Ltd have sold shares worth Rs 3,860 crore ($780 million) representing 9.9% to
institutional investors in the open market. The funds raised will be pumped into another privately held realty firm DLF Assets Ltd (DAL), which owes
the public listed firm around Rs 4,900 crore ($1 billion). DLF Assets purchases commercial properties from DLF and leases them out.
The transaction was done at a price of Rs 230 per share, a discount of 2.6% to the previous day's closing price. It was executed by Deutsche Bank and JP Morgan. More importantly, this could boost the share price as the free float has gone up from 11.4% to 21.3% which would bring in new investors in the company.
After this transaction promoters holding will go down from 88.6% to 78.7%. DLF, Vice
Chairman, Rajiv Singh, has said that the promoters are not looking to dilute any more holding in the near future.
Details of who were the buyers in the deal is not available yet but large existing institutional shareholders of DLF-- Capital International Fund, HSBC Holdings and Fidelity were among those who picked the stake.
institutional investors in the open market. The funds raised will be pumped into another privately held realty firm DLF Assets Ltd (DAL), which owes
the public listed firm around Rs 4,900 crore ($1 billion). DLF Assets purchases commercial properties from DLF and leases them out.
The transaction was done at a price of Rs 230 per share, a discount of 2.6% to the previous day's closing price. It was executed by Deutsche Bank and JP Morgan. More importantly, this could boost the share price as the free float has gone up from 11.4% to 21.3% which would bring in new investors in the company.
After this transaction promoters holding will go down from 88.6% to 78.7%. DLF, Vice
Chairman, Rajiv Singh, has said that the promoters are not looking to dilute any more holding in the near future.
Details of who were the buyers in the deal is not available yet but large existing institutional shareholders of DLF-- Capital International Fund, HSBC Holdings and Fidelity were among those who picked the stake.
Need to Change Archaic Juvenile Act: Kasab's Lawyer
The trial of Ajmal Amir Kasab, the sole surviving terrorist caught in the November 26 attacks, has thrown up the possibility of minors being used for terror attacks and time has come for the country to strengthen the Juvenile Justice Act to deal with such impending menace, special public prosecutor Ujjwal Nikam has said.
After Kasab unsuccessfully attempted to plead that he was a juvenile, a
possibility arises that terror groups might use minors to carry out suicide attacks, he warned. "Juvenile offenders are likely to infiltrate into the country. Time has come to change the archaic Juvenile Justice Act to ensure that terror suspect below the age of 18 should be tried under the stringent laws," said Nikam.
Recently, the Act was amended to increase the age of juvenile from 16 to 18 years. Even that would not suffice for a juvenile terrorist as there was no provision under the Act to award rigorous imprisonment like death penalty, Nikam said. A juvenile convict cannot be tried in a
regular court but only before a juvenile authority which does not award punishment even if guilt is proved, said Nikam.
Nikam said similar to Kasab, who had attempted to prove himself to be a juvenile to escape punishment taking advantage of the lenient Act, "Many young people are being brainwashed And used by terror groups and our existing laws are inadequate," Nikam said.
Nikam justified the need for examining FBI officials in Kasab trial saying it would help them provide the evidence in regard to phone calls made to Karachi during the attacks. The public prosecutor also favoured setting up of special courts to try terror cases just as was done in the case of 1993 Mumbai serial bomb blasts for speedy disposal. "There is a requirement that an anti-terror court should handle only one case. As of now, the condition is such that most anti-terror courts are handling multiple cases which delays the judgement", Nikam said. However, he opposed holding summary trials saying that trials should be held in a transparent manner giving a fair opportunity to an accused to defend himself.
Kasab, a resident of Faridkot in Pakistan, and two other alleged Indian Lashkar-e-Toiba operatives are facing trial for their alleged involvement in Mumbai terror attacks that killed 166 persons and injured 234.
Nikam said police had accumulated sufficient evidence against all the three accused. "In the case of Faheem Ansari and Sabauddin Ahmed, there were no confessions and we will be relying purely on evidence obtained to prove their guilt”.
Sharing his thoughts on the behaviour of Kasab during the trial, Nikam said he is not only been trained in terror warfare but also given training to escape the clutches of law by "dishonest" means. "Kasab said his age was 21 years to the Jailor and Doctor who examined him after his arrest but in the court he pleaded he was 17," he added.
After Kasab unsuccessfully attempted to plead that he was a juvenile, a
possibility arises that terror groups might use minors to carry out suicide attacks, he warned. "Juvenile offenders are likely to infiltrate into the country. Time has come to change the archaic Juvenile Justice Act to ensure that terror suspect below the age of 18 should be tried under the stringent laws," said Nikam.
Recently, the Act was amended to increase the age of juvenile from 16 to 18 years. Even that would not suffice for a juvenile terrorist as there was no provision under the Act to award rigorous imprisonment like death penalty, Nikam said. A juvenile convict cannot be tried in a
regular court but only before a juvenile authority which does not award punishment even if guilt is proved, said Nikam.
Nikam said similar to Kasab, who had attempted to prove himself to be a juvenile to escape punishment taking advantage of the lenient Act, "Many young people are being brainwashed And used by terror groups and our existing laws are inadequate," Nikam said.
Nikam justified the need for examining FBI officials in Kasab trial saying it would help them provide the evidence in regard to phone calls made to Karachi during the attacks. The public prosecutor also favoured setting up of special courts to try terror cases just as was done in the case of 1993 Mumbai serial bomb blasts for speedy disposal. "There is a requirement that an anti-terror court should handle only one case. As of now, the condition is such that most anti-terror courts are handling multiple cases which delays the judgement", Nikam said. However, he opposed holding summary trials saying that trials should be held in a transparent manner giving a fair opportunity to an accused to defend himself.
Kasab, a resident of Faridkot in Pakistan, and two other alleged Indian Lashkar-e-Toiba operatives are facing trial for their alleged involvement in Mumbai terror attacks that killed 166 persons and injured 234.
Nikam said police had accumulated sufficient evidence against all the three accused. "In the case of Faheem Ansari and Sabauddin Ahmed, there were no confessions and we will be relying purely on evidence obtained to prove their guilt”.
Sharing his thoughts on the behaviour of Kasab during the trial, Nikam said he is not only been trained in terror warfare but also given training to escape the clutches of law by "dishonest" means. "Kasab said his age was 21 years to the Jailor and Doctor who examined him after his arrest but in the court he pleaded he was 17," he added.
TATA SONS SELLS 1% TCS SHARES
Tata Sons, the primary holding company of the Tata group raised Rs
633.4 crore by selling 10.32 million shares of Tata Consultancy
Services in a bulk deal on the National Stock Exchange. The shares,
amounting to 1.05 per cent stake in India’s largest software exporter,
were held by Tata Ltd, a UK-based subsidiary of Tata Sons. The shares
were sold at Rs 615 per share.
The holding company of one of India’s largest business houses has
raised the money when its companies are facing a fund crunch. Tata
Motors, the country’s largest commercial vehicle maker, is in the
process of raising a $2 billion loan to refinance the remaining part of
the bridge loan it took to acquire Jaguar and Land Rover brands last
year. “With Tata Sons’ increased participation in its group companies’ investment requirements, Crisil expects the company’s capital structure to deteriorate from the present level over the medium term,” said the Mumbai-based credit rating agency in a note last month.
The company is also in the process of raising Rs 500 crore through issuance of bonds. Crisil has assigned AAA rating to the non-convertible debenture issue of the company.
“Tata Sons’ superior financial flexibility arises from its ability to raise additional funds by sale or pledge of shares of Tata Consultancy Services Ltd,” the Crisil had said in its note.
Tata Sons continues to directly hold 73.75 per cent in TCS. The stake was valued Rs 45,835 crore on Wednesday. Tata Sons is expected to continue to fund its participation in group companies through a judicious mix of debt and sale of investments. As the group’s primary holding company, the earnings of Tata Sons primarily come from dividends and sale of investments. Tata Sons had Rs 2,892 crore as cash and cash equivalents by the end of March 31, 2009, showing high liquidity.
633.4 crore by selling 10.32 million shares of Tata Consultancy
Services in a bulk deal on the National Stock Exchange. The shares,
amounting to 1.05 per cent stake in India’s largest software exporter,
were held by Tata Ltd, a UK-based subsidiary of Tata Sons. The shares
were sold at Rs 615 per share.
The holding company of one of India’s largest business houses has
raised the money when its companies are facing a fund crunch. Tata
Motors, the country’s largest commercial vehicle maker, is in the
process of raising a $2 billion loan to refinance the remaining part of
the bridge loan it took to acquire Jaguar and Land Rover brands last
year. “With Tata Sons’ increased participation in its group companies’ investment requirements, Crisil expects the company’s capital structure to deteriorate from the present level over the medium term,” said the Mumbai-based credit rating agency in a note last month.
The company is also in the process of raising Rs 500 crore through issuance of bonds. Crisil has assigned AAA rating to the non-convertible debenture issue of the company.
“Tata Sons’ superior financial flexibility arises from its ability to raise additional funds by sale or pledge of shares of Tata Consultancy Services Ltd,” the Crisil had said in its note.
Tata Sons continues to directly hold 73.75 per cent in TCS. The stake was valued Rs 45,835 crore on Wednesday. Tata Sons is expected to continue to fund its participation in group companies through a judicious mix of debt and sale of investments. As the group’s primary holding company, the earnings of Tata Sons primarily come from dividends and sale of investments. Tata Sons had Rs 2,892 crore as cash and cash equivalents by the end of March 31, 2009, showing high liquidity.
INDIAN GOVERNMENT TRANFERS 28000 CRORE FROM MSS ACCOUNTS
The Reserve Bank of India (RBI) said the government had transferred Rs 28,000 crore from the account maintained for the Market Stabilisation Scheme (MSS) to the normal cash account to fund expenditure. The decision to transfer the funds was taken after reviewing the cash position, the RBI said.
It may be recalled that the outstanding borrowing of the government from the RBI was Rs 40412 crore. This was more than the limit of Rs 20000 crore set under the agreement for Ways and Means Advances (WMA). After the transfer, the government is now backing within the WMA limit of Rs 20,000 crore. According to the agreement with the RBI, if the WMA borrowing stays above Rs 20,000 crore in April-September
for 10 successive business days, the government will have to draw it down by issuing securities to the market.
While borrowing under WMA is at the repo rate, currently 4.75 per cent, any overdraft is at 2 per cent above repo, or 6.75 per cent.
The RBI said based on the emerging fund requirements of the government, Rs 33,000 crore of MSS balances would be de-sequestered against the approved market borrowing
programme or bought back in the fiscal year 2009-10. The MSS outstanding as on May 2,
2009, is Rs 42,773 crore (face value).
In a parallel operation, an equivalent amount of government securities in the MSS portfolio will now form part of the normal borrowing of the government of India for fiscal year 2009-10.
It may be recalled that the outstanding borrowing of the government from the RBI was Rs 40412 crore. This was more than the limit of Rs 20000 crore set under the agreement for Ways and Means Advances (WMA). After the transfer, the government is now backing within the WMA limit of Rs 20,000 crore. According to the agreement with the RBI, if the WMA borrowing stays above Rs 20,000 crore in April-September
for 10 successive business days, the government will have to draw it down by issuing securities to the market.
While borrowing under WMA is at the repo rate, currently 4.75 per cent, any overdraft is at 2 per cent above repo, or 6.75 per cent.
The RBI said based on the emerging fund requirements of the government, Rs 33,000 crore of MSS balances would be de-sequestered against the approved market borrowing
programme or bought back in the fiscal year 2009-10. The MSS outstanding as on May 2,
2009, is Rs 42,773 crore (face value).
In a parallel operation, an equivalent amount of government securities in the MSS portfolio will now form part of the normal borrowing of the government of India for fiscal year 2009-10.
ICWAI MAKES SIX STANDARDS MANDATORY
The Institute of Cost and Works Accountants of India (ICWAI), the apex body regulating the cost accounting profession in the country, had made six cost accounting standards (CAS) mandatory from April 1, 2010. These standards are for classifications of costs, capacity determination, overheads, cost of production production for captive consumption, determination of average cost of transportation and material cost. These standards would bring in principle based accounting to give greater freedom to companies to treat different components of cost in an effective manner, bringing in flexibility and reducing compliance costs for companies.
“These standards would be applicable for all cost accountants in practice,” said Kunal Banerjee, President of ICWAI. At present, these standards are recommendatory only. However, from April next year, all practising cost accountants will have to make use of these standards while carrying out cost audits.
However, the standards are not mandatory for corporate entities, as they are governed under the Companies Act. Only cost accountants are covered under the ICWAI Act.
If a company is not following these standards, cost accountants are asked to make a suitable disclosure or qualification while undertaking cost audit.
To make companies also follow the cost accounting standards, an expert group constituted by the Ministry of Corporate Affairs (MCA) to review the working of the cost accounting profession in India recommended that cost accounting standards should be part of the existing National Advisory Committee on Accounting Standards (NACAS) or a similar body should be set up.
NACAS was set up under the companies act and accounting standards prepared by the
Institute of Chartered Accountants of India (ICAI) are notified after they are referred to the body.
The government has prescribed cost accounting records rules (CARR) in 43 industries. The companies which are covered by CARR are required to maintain the cost data in the manner prescribed under these rules.
Cost audit, supported by cost accounting standards, can provide relevant and credible cost and revenue data to regulators to support their decisions.
As of now, the institute has come out with six standards only, though there would be 39 cos accounting standards in all. Banerjee said the institute would bring out four more standards soon.
“These standards would be applicable for all cost accountants in practice,” said Kunal Banerjee, President of ICWAI. At present, these standards are recommendatory only. However, from April next year, all practising cost accountants will have to make use of these standards while carrying out cost audits.
However, the standards are not mandatory for corporate entities, as they are governed under the Companies Act. Only cost accountants are covered under the ICWAI Act.
If a company is not following these standards, cost accountants are asked to make a suitable disclosure or qualification while undertaking cost audit.
To make companies also follow the cost accounting standards, an expert group constituted by the Ministry of Corporate Affairs (MCA) to review the working of the cost accounting profession in India recommended that cost accounting standards should be part of the existing National Advisory Committee on Accounting Standards (NACAS) or a similar body should be set up.
NACAS was set up under the companies act and accounting standards prepared by the
Institute of Chartered Accountants of India (ICAI) are notified after they are referred to the body.
The government has prescribed cost accounting records rules (CARR) in 43 industries. The companies which are covered by CARR are required to maintain the cost data in the manner prescribed under these rules.
Cost audit, supported by cost accounting standards, can provide relevant and credible cost and revenue data to regulators to support their decisions.
As of now, the institute has come out with six standards only, though there would be 39 cos accounting standards in all. Banerjee said the institute would bring out four more standards soon.
INDIA GETS 43% FDI THROUGH MAURITIUS ROUTE
Mauritius, considered a tax haven for Global Inc, accounted for 43 percent of cumulative foreign fund inflow into India, even as money parked overseas for tax
avoidance has become an issue in the Lok Sabha polls.
Of the total $81 billion FDI that has come into India since April 2000, $35.18 billion was routed through the Mauritius route, according to figures available with the Department of Industrial Policy and Promotion.
The Organisation of Economic Cooperation and Development (OECD) which has drawn a global list of tax havens, has not included Mauritius among the preferred jurisdictions of the tax get-aways.
However, the tiny nation in the Indian Ocean, which levies effective corporate tax of less than three percent, is considered the best place for avoiding taxes.
Though India has a Double Taxation Avoidance Agreement with about 65 countries like
the US, UK, Japan, France, and Germany, it is Mauritius which is the most preferred
route for FDI inflows.
Even though India offers several exemptions and relief’s to companies on the corporation tax of 30 percent, the effective rate in the country for the corporate is not less than 20 percent.
avoidance has become an issue in the Lok Sabha polls.
Of the total $81 billion FDI that has come into India since April 2000, $35.18 billion was routed through the Mauritius route, according to figures available with the Department of Industrial Policy and Promotion.
The Organisation of Economic Cooperation and Development (OECD) which has drawn a global list of tax havens, has not included Mauritius among the preferred jurisdictions of the tax get-aways.
However, the tiny nation in the Indian Ocean, which levies effective corporate tax of less than three percent, is considered the best place for avoiding taxes.
Though India has a Double Taxation Avoidance Agreement with about 65 countries like
the US, UK, Japan, France, and Germany, it is Mauritius which is the most preferred
route for FDI inflows.
Even though India offers several exemptions and relief’s to companies on the corporation tax of 30 percent, the effective rate in the country for the corporate is not less than 20 percent.
CHINA - INDIA DISPUTES
China Looms Large in India's Election
Call it the Giant-Next-Door complex. While the world worries about India and China eating its lunch, India, for its part, keeps a wary eye on China. For India it's a decades-old habit, this anxious concern about its larger, more prosperous neighbor. India came out on the losing side of a border war in the 1960s between the two Asian giants, and many Indians have question- ned Chinese motives ever since. Just in the past year, New Delhi has clashed with Beijing over trade issues, banning Chinese toy imports amid allegations of tainted chemicals, and fretted publicly over China's overt support of India's archrival, Pakistan. The Chinese, for their part, have
continued to challenge Indian ownership of the northeastern Indian state of Arunachal Pradesh, which the Chinese refer to as South Tibet. In another border dispute, China claims the Siachen glacier, which makes up almost one-third of the
disputed state of Kashmir, which Pakistan also claims. Beijing has also repeated protests about India's providing sanctuary to the Dalai Lama.
With India's month long national elections wrapping up on May 16, China is again figuring prominently in the national conversation. Indian Prime Minister Manmohan Singh has repeatedly said (during the release of the Congress Party's election manifesto) that "with the right set of reforms and the right political party, India can do even better than China." After the Chinese Foreign Ministry in April referred to Nepal and Sri Lanka as "friendly neighbors of China" that Beijing wants to help "maintain their sovereignty," India's Home Minister, P. Chidambaram, issued a furious response, speaking in the press conference that "China is fishing in troubled waters." This wasn't the first time Chidambaram had targeted China. Last
year, while lobbying members of Parliament to support a controversial nuclear-power deal with the U.S., he raised the Chinese bogeyman. "I don't want to be envious of China," he told his colleagues, arguing the deal would allow India to erase its electricity shortfalls and catch up with China's economy.
Info Tech Rivalry
Opposition leader L.K. Advani, of the Bharatiya Janata Party, also sees the advantages of playing the China card and regularly blames Congress for holding back India's growth, pointing to how much better the Chinese have done. Advani promises to do more for the one sector in which India has an undeniable lead over China—the IT industry. "If China can beat the world in the Physical infrastructure, India can beat the world in IT infrastructure," he wrote in a manifesto that detailed plans to enhance rural access to IT services. Advani, 81, told in an election rally on May 3 that his party had advocated back in the 1960s the need for India to develop nuclear weapons to match China's. India lost a short war with China in 1965 but defeated Pakistan in three separate wars. "The same victory could have happened in case
of China, had India had an atom bomb," he said, according to the Press Trust of India. India's China fixation is part insecurity, part blindness, says Razeen Sally, a professor at the London School of Economics who has written extensively about India. While the world lumps India and China together, he argues, the countries are worlds apart. "If you look at the hard numbers, China is not only ahead of India, but it has also been widening" the gap, Sally
says. "On every big measure you look at—living standards, international trade, foreign investments, infrastructure, the business climate, trading procedures, all the way to carbon emissions—you see not just that China is further ahead from India, but the gap has grown."
China entered the 1980s with many of the same problems that plagued India. Both had a
large, impoverished rural population, few exports, and a weak currency. But in the years since then, China has expanded its economy to approximately three times that of India's, to $3.42 trillion, in 2008. Only the U.S., Japan, and Germany are larger. China exports about 10 times as many goods as India, spends six times as much on infrastructure, and has a lower percentage of its population living in poverty. "The challenges are very similar: basically the ability to move hundreds of millions out of subsistence agriculture to non-agriculture jobs,
and to sustain that for a long time," says Subir Gokarn, Asia Pacific Chief Economist for Standard & Poor's, which, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP). "India has not had the same success in translating growth into non-agricultural
employment."
Towering Chinese Economic Clout
The two countries' response to the global recession shows how India's slower rate of growth puts it at a disadvantage to China. Both countries announced big fiscal stimulus packages last year, but China's was more than 10 times larger than India's—$568 billion compared with India's $50 billion. Even that relatively small amount put India's budget deficit at more than 10% of gross domestic product and prompted a scolding from ratings agencies that
downgraded the outlook on Indian government debt. Beijing received no such reprimand.
China's stimulus package was infrastructure-focused, but India's was more along the lines of tax breaks.
Politicians from Singh's government argue that, despite the less ambitious focus of India's plan, the stimulus nonetheless has proved effective. India's banks are lending again, some economic activity is picking up, and India's benchmark Sensex stock index is up 26% for the year, after falling 52% in 2008. Members of the opposition still call for India to take a page
from Beijing's playbook and start spending a lot more on infrastructure projects. India's infrastructure needs for the next five years are estimated at more than $500 billion, which includes roads, airports, railroads, and power projects. In India government has to come out at
the forefront," says Arun Jaitley, the BJP General Secretary. "Whether through a public-private partnership model or just through public spending, you have to prime up the economy
through infrastructure spending."
Economists say India needs to make further reforms, though, if the country hopes to close the gap with China. "The aspiration to do things the way the Chinese do is a realistic one, not a fantasy" says Gokarn. "But there are certain kinds of investments that you have to make in
your infrastructure, in your labor markets, and in other areas. Only that will allow this transition to happen."
Call it the Giant-Next-Door complex. While the world worries about India and China eating its lunch, India, for its part, keeps a wary eye on China. For India it's a decades-old habit, this anxious concern about its larger, more prosperous neighbor. India came out on the losing side of a border war in the 1960s between the two Asian giants, and many Indians have question- ned Chinese motives ever since. Just in the past year, New Delhi has clashed with Beijing over trade issues, banning Chinese toy imports amid allegations of tainted chemicals, and fretted publicly over China's overt support of India's archrival, Pakistan. The Chinese, for their part, have
continued to challenge Indian ownership of the northeastern Indian state of Arunachal Pradesh, which the Chinese refer to as South Tibet. In another border dispute, China claims the Siachen glacier, which makes up almost one-third of the
disputed state of Kashmir, which Pakistan also claims. Beijing has also repeated protests about India's providing sanctuary to the Dalai Lama.
With India's month long national elections wrapping up on May 16, China is again figuring prominently in the national conversation. Indian Prime Minister Manmohan Singh has repeatedly said (during the release of the Congress Party's election manifesto) that "with the right set of reforms and the right political party, India can do even better than China." After the Chinese Foreign Ministry in April referred to Nepal and Sri Lanka as "friendly neighbors of China" that Beijing wants to help "maintain their sovereignty," India's Home Minister, P. Chidambaram, issued a furious response, speaking in the press conference that "China is fishing in troubled waters." This wasn't the first time Chidambaram had targeted China. Last
year, while lobbying members of Parliament to support a controversial nuclear-power deal with the U.S., he raised the Chinese bogeyman. "I don't want to be envious of China," he told his colleagues, arguing the deal would allow India to erase its electricity shortfalls and catch up with China's economy.
Info Tech Rivalry
Opposition leader L.K. Advani, of the Bharatiya Janata Party, also sees the advantages of playing the China card and regularly blames Congress for holding back India's growth, pointing to how much better the Chinese have done. Advani promises to do more for the one sector in which India has an undeniable lead over China—the IT industry. "If China can beat the world in the Physical infrastructure, India can beat the world in IT infrastructure," he wrote in a manifesto that detailed plans to enhance rural access to IT services. Advani, 81, told in an election rally on May 3 that his party had advocated back in the 1960s the need for India to develop nuclear weapons to match China's. India lost a short war with China in 1965 but defeated Pakistan in three separate wars. "The same victory could have happened in case
of China, had India had an atom bomb," he said, according to the Press Trust of India. India's China fixation is part insecurity, part blindness, says Razeen Sally, a professor at the London School of Economics who has written extensively about India. While the world lumps India and China together, he argues, the countries are worlds apart. "If you look at the hard numbers, China is not only ahead of India, but it has also been widening" the gap, Sally
says. "On every big measure you look at—living standards, international trade, foreign investments, infrastructure, the business climate, trading procedures, all the way to carbon emissions—you see not just that China is further ahead from India, but the gap has grown."
China entered the 1980s with many of the same problems that plagued India. Both had a
large, impoverished rural population, few exports, and a weak currency. But in the years since then, China has expanded its economy to approximately three times that of India's, to $3.42 trillion, in 2008. Only the U.S., Japan, and Germany are larger. China exports about 10 times as many goods as India, spends six times as much on infrastructure, and has a lower percentage of its population living in poverty. "The challenges are very similar: basically the ability to move hundreds of millions out of subsistence agriculture to non-agriculture jobs,
and to sustain that for a long time," says Subir Gokarn, Asia Pacific Chief Economist for Standard & Poor's, which, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP). "India has not had the same success in translating growth into non-agricultural
employment."
Towering Chinese Economic Clout
The two countries' response to the global recession shows how India's slower rate of growth puts it at a disadvantage to China. Both countries announced big fiscal stimulus packages last year, but China's was more than 10 times larger than India's—$568 billion compared with India's $50 billion. Even that relatively small amount put India's budget deficit at more than 10% of gross domestic product and prompted a scolding from ratings agencies that
downgraded the outlook on Indian government debt. Beijing received no such reprimand.
China's stimulus package was infrastructure-focused, but India's was more along the lines of tax breaks.
Politicians from Singh's government argue that, despite the less ambitious focus of India's plan, the stimulus nonetheless has proved effective. India's banks are lending again, some economic activity is picking up, and India's benchmark Sensex stock index is up 26% for the year, after falling 52% in 2008. Members of the opposition still call for India to take a page
from Beijing's playbook and start spending a lot more on infrastructure projects. India's infrastructure needs for the next five years are estimated at more than $500 billion, which includes roads, airports, railroads, and power projects. In India government has to come out at
the forefront," says Arun Jaitley, the BJP General Secretary. "Whether through a public-private partnership model or just through public spending, you have to prime up the economy
through infrastructure spending."
Economists say India needs to make further reforms, though, if the country hopes to close the gap with China. "The aspiration to do things the way the Chinese do is a realistic one, not a fantasy" says Gokarn. "But there are certain kinds of investments that you have to make in
your infrastructure, in your labor markets, and in other areas. Only that will allow this transition to happen."
Intel CEO Sees Orders Picking Up
Intel Corp. executives said conditions in its existing
businesses aren't as bad as people think, while efforts
to move into new sectors are starting to gain traction.
The company also discussed an effort to spur the
creation of thin, light notebook computers at much
lower price points than current systems in that
category, yet not as inexpensive as a breed of
portables called netbooks that emerged in 2008.
Paul Otellini, Intel's Chief Executive Officer, said demand for its computer chips appeared to have "bottomed out" in the first quarter. At a meeting with analysts, he said that the company's recent order pattern indicates business in the current period is "a little better" than the company expected.
Mr. Otellini noted that the market research firm Gartner Inc. predicts personal computer unit sales will decline about 10% this year. More broadly, Mr. Otellini argued that the most telling measure of high-tech health is the growth of Internet traffic, which continued to grow in the current downturn - just as it did when the initial Internet boom turned to a bust in late 2000. He predicted traffic growth will continue, justifying the company's massive investments in factories that turn silicon wafers into chips.
"There is no recession in the growth of the Internet," he said. "This is the fundamental driver of Intel Silicon." Sean Maloney, an Intel Executive Vice President in charge of sales and marketing, noted that computer demand at the moment appears to be strongest for products sold to consumers. By contrast, demand for computers purchased by companies -- particularly PCs -- remains weak, he said.
Perhaps the biggest criticism of Intel's performance in the last decade is its failure to diversify effectively. The company continues to make most of its money from sales of chips that serve as calculating engines for desktop and portable PCs and server systems.
Mr. Otellini and other Intel executives cited evidence that they said points to progress in moving to four new markets. The first is represented by netbooks, portables that often cost $300 or less and typically use a low-end Intel chip called Atom. Mr. Otellini said the first four quarters of sales in that market have taken off faster than two well-known hits, Nintendo Corporation Wii video game console and Apple Inc.'s iPhone.
Intel is also targeting chips for smartphones, for consumer electronics products and for so-called "embedded applications,” which include industrial and office equipment. By 2011, the combination of the new sectors with existing businesses will represent a market that
consumes about 1 billion chips a year, while sectors Intel now serves consume about a third of that total, Mr. Otellini said.
While Intel has discussed using its chips to target those new sectors before, Mr. Otellini and other executives put new emphasis on how software will help take its technology into new markets. One example is Moblin, a version of Linux that Intel has been pushing for smartphones and netbooks.
Renee James, the Vice President of Intel's software efforts, noted other new initiatives that include tools to help programmers exploit chips that come with multiple processing units. She also noted that the company had purchased a company called Opened Hand Ltd., a London-based startup she said would aid development of new software around a popular low-end chip called Atom.
Mr. Maloney said Atom-based netbooks are not as good at certain chores consumers want to do, like playing high-quality video, he said.
Besides driving the growth of netbooks, Mr. Maloney said Intel is trying to spur demand by trying to take thin and light laptops into mainstream price points. He didn't quantify system pricing, but such portables typically cost well over $1,000, while most laptops sold cost well below that.
The issue for the notebook PC industry over the next year and a half is that "thin is in," Mr. Maloney said. He said these new laptops, will be about 50% of the weight of conventional portables, similar to better performance and "radically better" battery life.
Intel's analyst meeting took place the day before European Union antitrust regulators is expected to fine the company for tactics it has used in countering rival Advanced Micro Devices Inc. Asked about the possible EU action; Mr. Otellini characterized that possibility as a rumor. "I can assure that you when it's anything but a rumor we will comment," he said.
Intel Corp. executives said conditions in its existing
businesses aren't as bad as people think, while efforts
to move into new sectors are starting to gain traction.
The company also discussed an effort to spur the
creation of thin, light notebook computers at much
lower price points than current systems in that
category, yet not as inexpensive as a breed of
portables called netbooks that emerged in 2008.
Paul Otellini, Intel's Chief Executive Officer, said demand for its computer chips appeared to have "bottomed out" in the first quarter. At a meeting with analysts, he said that the company's recent order pattern indicates business in the current period is "a little better" than the company expected.
Mr. Otellini noted that the market research firm Gartner Inc. predicts personal computer unit sales will decline about 10% this year. More broadly, Mr. Otellini argued that the most telling measure of high-tech health is the growth of Internet traffic, which continued to grow in the current downturn - just as it did when the initial Internet boom turned to a bust in late 2000. He predicted traffic growth will continue, justifying the company's massive investments in factories that turn silicon wafers into chips.
"There is no recession in the growth of the Internet," he said. "This is the fundamental driver of Intel Silicon." Sean Maloney, an Intel Executive Vice President in charge of sales and marketing, noted that computer demand at the moment appears to be strongest for products sold to consumers. By contrast, demand for computers purchased by companies -- particularly PCs -- remains weak, he said.
Perhaps the biggest criticism of Intel's performance in the last decade is its failure to diversify effectively. The company continues to make most of its money from sales of chips that serve as calculating engines for desktop and portable PCs and server systems.
Mr. Otellini and other Intel executives cited evidence that they said points to progress in moving to four new markets. The first is represented by netbooks, portables that often cost $300 or less and typically use a low-end Intel chip called Atom. Mr. Otellini said the first four quarters of sales in that market have taken off faster than two well-known hits, Nintendo Corporation Wii video game console and Apple Inc.'s iPhone.
Intel is also targeting chips for smartphones, for consumer electronics products and for so-called "embedded applications,” which include industrial and office equipment. By 2011, the combination of the new sectors with existing businesses will represent a market that
consumes about 1 billion chips a year, while sectors Intel now serves consume about a third of that total, Mr. Otellini said.
While Intel has discussed using its chips to target those new sectors before, Mr. Otellini and other executives put new emphasis on how software will help take its technology into new markets. One example is Moblin, a version of Linux that Intel has been pushing for smartphones and netbooks.
Renee James, the Vice President of Intel's software efforts, noted other new initiatives that include tools to help programmers exploit chips that come with multiple processing units. She also noted that the company had purchased a company called Opened Hand Ltd., a London-based startup she said would aid development of new software around a popular low-end chip called Atom.
Mr. Maloney said Atom-based netbooks are not as good at certain chores consumers want to do, like playing high-quality video, he said.
Besides driving the growth of netbooks, Mr. Maloney said Intel is trying to spur demand by trying to take thin and light laptops into mainstream price points. He didn't quantify system pricing, but such portables typically cost well over $1,000, while most laptops sold cost well below that.
The issue for the notebook PC industry over the next year and a half is that "thin is in," Mr. Maloney said. He said these new laptops, will be about 50% of the weight of conventional portables, similar to better performance and "radically better" battery life.
Intel's analyst meeting took place the day before European Union antitrust regulators is expected to fine the company for tactics it has used in countering rival Advanced Micro Devices Inc. Asked about the possible EU action; Mr. Otellini characterized that possibility as a rumor. "I can assure that you when it's anything but a rumor we will comment," he said.
CLIMATE CHANGE AND EVOLUTION
Climate change and evolution
Despite a frenzied last-minute drive involving snowstorms in Europe and the
eastern United States, planet Earth failed to save itself from another last-place
finish in 2010: once again, it was the least cold year on record. The World
Meteorological Organization announced its finding last week that global mean
temperatures for the year were 0.53°C above the 1961-1990 mean, 0.01°C
warmer than 2005 and 0.02°C above 1998. With the comparison having a margin
of uncertainty of 0.09°C, the three years are considered tied for the hottest year
on record. That followed results the previous week from NOAA, which found 2010
and 2005 tied as the hottest years ever, and NASA, which found the same thing.
(They both think 1998 was a bit colder.)
The fact that every one of the twelve hottest years on record has come since
1997 is a little harder to wave away. 2010 was also the wettest year ever,
corresponding to the expectation that higher heat means more water vapour.
More countries set national high-temperature records in 2010 than ever before,
including the biggest one, Russia. Arctic sea ice in December was at its lowest
level ever, temperatures across a broad swathe of northern Canada have been
20° C higher than normal for the past month, the record temperatures are
coming despite the lowest levels of solar activity in a century and a La Nina effect
that should be making Canada colder rather than warmer, and so on. It is of
course possible that global warming plateaued this year; it's also possible that it
plateaued this morning. One can always hope! For now, though, this is the basic
shape of things:
There have been tons of new feather-bearing fossils unearthed over the past 15
years, and scientists can now use microscopic analysis and knowledge of how
modern feathers work to actually figure out what color some of the feathers on
these dinosaurs were. It's pretty clear that the development of feathers came
long before they had anything to do with flight, but it's still not so clear whether
feathered dinosaurs evolved into birds or whether they (and feathered proto-
crocodiles!) shared a common feathered ancestor. Anyway, towards the
beginning of the article comes this:
The origin of this wonderful mechanism is one of evolution's most durable
mysteries. In 1861, just two years after Darwin published Origin of Species,
quarry workers in Germany unearthed spectacular fossils of a crow-size bird,
dubbed Archaeopteryx, that lived about 150 million years ago. It had feathers
and other traits of living birds but also vestiges of a reptilian past, such as teeth
in its mouth, claws on its wings, and a long, bony tail. Like fossils of whales with
legs, Archaeopteryx seemed to capture a moment in a critical evolutionary
metamorphosis. "It is a grand case for me," Darwin confided to a friend.
Think about how that must have looked to contemporaries. Darwin publishes his
theory that species develop through evolution from other species. Many people
think, wild idea, but can one species really change so deeply over time that it
becomes a different species? Wolves into dogs, sure, but fish into lizards and so
forth? Then, two years later, a fossil is discovered that suggests dinosaurs
evolving into birds. To first have a theory presented that suggests these
outlandish transformations, and then to have an example turn up that perfectly
describes the theory's most improbable consequences, with no possibility of prior
knowledge—this is an extremely convincing sequence of evidence.
But if you grew up, say, 150 years after "The Origin of Species" was published,
you didn't experience that remarkable sequence of evidence. You get the theory
of evolution and the fossil background presented at the same time. So if you
want to be an evolution sceptic, the fossil record just becomes another set of
data you can poke holes in, along with the theory. After all, nobody understands
what function feathers served before they were used for flight. If they were for
mating displays, why did they turn out to be perfect for aerodynamics? How come
nothing has feathers anymore that doesn't fly, or isn't descended from something
that did? Darwin's theory can't explain it! And so on.
Now, back to global warming. The thesis that rising global temperature data were
due to a greenhouse effect produced by industrial emissions of CO2 and other
gases, and that this might lead to environmental disaster, was something we first
encountered as a mind-bending idea being thrown around by scientists in the
mid-1980s. If, after 1988, global temperatures had stopped rising, or had started
to exhibit a lot of volatility. Instead, for a decade and a half, global mean
temperatures kept going up and up. They bounced around a bit in the mid-2000s,
and have now resumed rising again.
For people my age or older who were paying attention over the past couple of
decades, that really ought to be convincing. But for people who just joined the
conversation when "An Inconvenient Truth" came out, things are different. For
them, the evidence of global warming was presented at the same time as the
theory. And so they're susceptible to people trying to poke holes in the data or
the theory. The temperature rise from 1998-2008 isn't statistically significant,
tree ring data is unreliable, and so forth. Give them another two decades, and
they'll probably come around. Unfortunately, by that time an enormous amount
of damage will already have been done.
Despite a frenzied last-minute drive involving snowstorms in Europe and the
eastern United States, planet Earth failed to save itself from another last-place
finish in 2010: once again, it was the least cold year on record. The World
Meteorological Organization announced its finding last week that global mean
temperatures for the year were 0.53°C above the 1961-1990 mean, 0.01°C
warmer than 2005 and 0.02°C above 1998. With the comparison having a margin
of uncertainty of 0.09°C, the three years are considered tied for the hottest year
on record. That followed results the previous week from NOAA, which found 2010
and 2005 tied as the hottest years ever, and NASA, which found the same thing.
(They both think 1998 was a bit colder.)
The fact that every one of the twelve hottest years on record has come since
1997 is a little harder to wave away. 2010 was also the wettest year ever,
corresponding to the expectation that higher heat means more water vapour.
More countries set national high-temperature records in 2010 than ever before,
including the biggest one, Russia. Arctic sea ice in December was at its lowest
level ever, temperatures across a broad swathe of northern Canada have been
20° C higher than normal for the past month, the record temperatures are
coming despite the lowest levels of solar activity in a century and a La Nina effect
that should be making Canada colder rather than warmer, and so on. It is of
course possible that global warming plateaued this year; it's also possible that it
plateaued this morning. One can always hope! For now, though, this is the basic
shape of things:
There have been tons of new feather-bearing fossils unearthed over the past 15
years, and scientists can now use microscopic analysis and knowledge of how
modern feathers work to actually figure out what color some of the feathers on
these dinosaurs were. It's pretty clear that the development of feathers came
long before they had anything to do with flight, but it's still not so clear whether
feathered dinosaurs evolved into birds or whether they (and feathered proto-
crocodiles!) shared a common feathered ancestor. Anyway, towards the
beginning of the article comes this:
The origin of this wonderful mechanism is one of evolution's most durable
mysteries. In 1861, just two years after Darwin published Origin of Species,
quarry workers in Germany unearthed spectacular fossils of a crow-size bird,
dubbed Archaeopteryx, that lived about 150 million years ago. It had feathers
and other traits of living birds but also vestiges of a reptilian past, such as teeth
in its mouth, claws on its wings, and a long, bony tail. Like fossils of whales with
legs, Archaeopteryx seemed to capture a moment in a critical evolutionary
metamorphosis. "It is a grand case for me," Darwin confided to a friend.
Think about how that must have looked to contemporaries. Darwin publishes his
theory that species develop through evolution from other species. Many people
think, wild idea, but can one species really change so deeply over time that it
becomes a different species? Wolves into dogs, sure, but fish into lizards and so
forth? Then, two years later, a fossil is discovered that suggests dinosaurs
evolving into birds. To first have a theory presented that suggests these
outlandish transformations, and then to have an example turn up that perfectly
describes the theory's most improbable consequences, with no possibility of prior
knowledge—this is an extremely convincing sequence of evidence.
But if you grew up, say, 150 years after "The Origin of Species" was published,
you didn't experience that remarkable sequence of evidence. You get the theory
of evolution and the fossil background presented at the same time. So if you
want to be an evolution sceptic, the fossil record just becomes another set of
data you can poke holes in, along with the theory. After all, nobody understands
what function feathers served before they were used for flight. If they were for
mating displays, why did they turn out to be perfect for aerodynamics? How come
nothing has feathers anymore that doesn't fly, or isn't descended from something
that did? Darwin's theory can't explain it! And so on.
Now, back to global warming. The thesis that rising global temperature data were
due to a greenhouse effect produced by industrial emissions of CO2 and other
gases, and that this might lead to environmental disaster, was something we first
encountered as a mind-bending idea being thrown around by scientists in the
mid-1980s. If, after 1988, global temperatures had stopped rising, or had started
to exhibit a lot of volatility. Instead, for a decade and a half, global mean
temperatures kept going up and up. They bounced around a bit in the mid-2000s,
and have now resumed rising again.
For people my age or older who were paying attention over the past couple of
decades, that really ought to be convincing. But for people who just joined the
conversation when "An Inconvenient Truth" came out, things are different. For
them, the evidence of global warming was presented at the same time as the
theory. And so they're susceptible to people trying to poke holes in the data or
the theory. The temperature rise from 1998-2008 isn't statistically significant,
tree ring data is unreliable, and so forth. Give them another two decades, and
they'll probably come around. Unfortunately, by that time an enormous amount
of damage will already have been done.
FLAG HOISTING IN KASHMIR
Indian nationalism in Kashmir: A most unwelcome tricolour
What are the leaders of India’s main opposition, the Bharatiya Janata Party
(BJP), trying to achieve in Kashmir? Shortly before January 26th, India’s Republic
Day, a moment for military parades and celebrating the establishment of the
independent country’s constitution, some of the BJP’s leaders tried to score
political points by marching to Kashmir, the disputed territory on the northern
border with Pakistan.
For weeks the BJP had been vowing to raise the Indian tricolour in the centre of
Srinagar, the summer capital of the state of Jammu & Kashmir. Despite warnings
that, by doing so, they could provoke mass protests, counter-demonstrations and
possibly renewed violence, the BJP persisted, calling theirs a “nationalist”
campaign and accusing the Congress-led government in Delhi (and, by extension,
the government of Kashmir) of “appeasing” separatists and committing
“psychological surrender”.
The BJP’s leaders were stopped before they could unfurl the national flag. A few
nights before Republic Day, a trainload of 2,000 of the party’s activists, which
had been chugging north from Karnataka state towards Kashmir, was quietly
turned around by officials as it passed through Maharashtra state, and sent south
again. A clutch of BJP leaders who managed to fly to Kashmir were arrested on
arrival. A group of the party’s activists did manage to block roads and batter a
minister’s car.
The BJP claims it was attempting nothing controversial. Kashmir is a part of
India, so why not ensure that the Indian flag is raised there? The answer—as
even the most nationalist provocateur knows—is that Kashmiris, the majority of
whom are Muslim, have long disputed India’s right to rule over the territory. In
2010, stone-throwing youths launched mass protests in Srinagar, and separatist
leaders called strikes, earning a violent response from ill-trained police. Over 110
Kashmiris were killed.
Almost nobody, not even Kashmiris, sees any prospect of winning independence
from India, let alone joining their territory to Pakistan. So the real contest is over
how much autonomy Kashmir can win for itself within India, and, in the short
term, how to get Indian soldiers and police (which are too often responsible for
repression and torture) to behave better. As important, for India’s sake as a
whole, and in particular for Kashmir, is the need to discourage the rise of Islamic
extremism in the territory.
In the past few weeks India’s government has made some encouraging noises.
This month it announced its ambition to cut, by 25%, the number of soldiers
deployed in Kashmir (it is unclear how many are there in the first place, but
activists tend to put the number at 500,000). The police are being retrained.
Omar Abdullah, the chief minister of Kashmir, says he wants a repressive “special
powers” law lifted. In return, some Kashmiri leaders have begun to admit to past
wrongs of their own, notably conceding that some assassinations of separatist
leaders were carried out by rival factions of their fellows, and not by Indian
authorities.
Just as limited progress is being made—with Mr Abdullah saying that the priority
is to avoid a repeat of the 2010 riots and bloodshed—the BJP is trying to stoke up
nationalist fervour for its own party-political ends. As a tactic to raise its profile
and popularity among (mostly Hindu) voters in other parts of India, it may
possibly work. Its leaders reckon that portraying Congress as weak on this issue
could complement a successful campaign that is currently painting Manmohan
Singh, the prime minister, as weak on corruption. But the BJP’s move looks
cynical and may make it harder to avoid another round of protests and killings in
2011.
What are the leaders of India’s main opposition, the Bharatiya Janata Party
(BJP), trying to achieve in Kashmir? Shortly before January 26th, India’s Republic
Day, a moment for military parades and celebrating the establishment of the
independent country’s constitution, some of the BJP’s leaders tried to score
political points by marching to Kashmir, the disputed territory on the northern
border with Pakistan.
For weeks the BJP had been vowing to raise the Indian tricolour in the centre of
Srinagar, the summer capital of the state of Jammu & Kashmir. Despite warnings
that, by doing so, they could provoke mass protests, counter-demonstrations and
possibly renewed violence, the BJP persisted, calling theirs a “nationalist”
campaign and accusing the Congress-led government in Delhi (and, by extension,
the government of Kashmir) of “appeasing” separatists and committing
“psychological surrender”.
The BJP’s leaders were stopped before they could unfurl the national flag. A few
nights before Republic Day, a trainload of 2,000 of the party’s activists, which
had been chugging north from Karnataka state towards Kashmir, was quietly
turned around by officials as it passed through Maharashtra state, and sent south
again. A clutch of BJP leaders who managed to fly to Kashmir were arrested on
arrival. A group of the party’s activists did manage to block roads and batter a
minister’s car.
The BJP claims it was attempting nothing controversial. Kashmir is a part of
India, so why not ensure that the Indian flag is raised there? The answer—as
even the most nationalist provocateur knows—is that Kashmiris, the majority of
whom are Muslim, have long disputed India’s right to rule over the territory. In
2010, stone-throwing youths launched mass protests in Srinagar, and separatist
leaders called strikes, earning a violent response from ill-trained police. Over 110
Kashmiris were killed.
Almost nobody, not even Kashmiris, sees any prospect of winning independence
from India, let alone joining their territory to Pakistan. So the real contest is over
how much autonomy Kashmir can win for itself within India, and, in the short
term, how to get Indian soldiers and police (which are too often responsible for
repression and torture) to behave better. As important, for India’s sake as a
whole, and in particular for Kashmir, is the need to discourage the rise of Islamic
extremism in the territory.
In the past few weeks India’s government has made some encouraging noises.
This month it announced its ambition to cut, by 25%, the number of soldiers
deployed in Kashmir (it is unclear how many are there in the first place, but
activists tend to put the number at 500,000). The police are being retrained.
Omar Abdullah, the chief minister of Kashmir, says he wants a repressive “special
powers” law lifted. In return, some Kashmiri leaders have begun to admit to past
wrongs of their own, notably conceding that some assassinations of separatist
leaders were carried out by rival factions of their fellows, and not by Indian
authorities.
Just as limited progress is being made—with Mr Abdullah saying that the priority
is to avoid a repeat of the 2010 riots and bloodshed—the BJP is trying to stoke up
nationalist fervour for its own party-political ends. As a tactic to raise its profile
and popularity among (mostly Hindu) voters in other parts of India, it may
possibly work. Its leaders reckon that portraying Congress as weak on this issue
could complement a successful campaign that is currently painting Manmohan
Singh, the prime minister, as weak on corruption. But the BJP’s move looks
cynical and may make it harder to avoid another round of protests and killings in
2011.
EURO AREA'S BAIL OUT STRATEGY
The euro area
The euro area’s bail-out strategy is not working. It is time for insolvent
countries to restructure their debts
For a few weeks over the Christmas holidays, Europeans put their sovereign-debt
crisis on hold. Now they are facing grim reality once more. Bond yields are
spiking in an ever broader group of countries, just as the euro zone’s
governments need to raise vast sums from the markets. On January 12th
Portugal was forced to pay 6.7% for ten-year money—better than feared but a
price it cannot afford for long. Yields for Belgian debt have jumped, as investors
fret about its load of debt and lack of leadership. Spain is hanging on.
This mess leads to a depressing conclusion: Europe’s bail-out strategy, designed
to calm financial markets and place a firewall between the euro zone’s periphery
and its centre, is failing. Investors are becoming more, not less, nervous, and the
crisis is spreading. Plan A, based on postponing the restructuring of Europe’s
struggling countries, was worth trying: it has bought some time. But it is no
longer working. Restructuring now is more clearly affordable than it was last
year. It is also surely cheaper for everybody than it will be in a few years’ time.
Hence the need for Plan B.
The initial response, forged in the rescue of Greece in May 2010, has been
undone by its own contradiction. Europe’s politicians have created a system for
making loans to prevent illiquid governments from defaulting in the short term,
while simultaneously making clear (at Germany’s insistence) that in the medium
term insolvent countries should have their debts restructured. Unsure about who
will eventually be deemed insolvent, investors are nervous—and costs have risen.
The least-bad way to deal with this contradiction is to restructure the debt of
plainly insolvent countries now. Italy and Belgium have high debt levels but more
ample private savings, and their underlying budgets are closer to surplus. There
is, thus, a reasonable chance that, handled correctly, euro-zone sovereign
defaults could be limited to three small, peripheral economies.
The perils of procrastination
This newspaper does not advocate the first rich-country sovereign defaults in half
a century lightly. But the logic for taking action sooner rather than later is
powerful. First, the only plausible long-term alternative to debt restructuring—
permanent fiscal transfer from Europe’s richer core seems to be a political non-
starter. Some of Europe’s politicians favour closer fiscal union, including issuing
euro bonds, but they are unlikely to accept budget transfers big enough to
underwrite the peripheral economies’ entire debt stock.
Second, the dangers from debt restructuring have diminished even as the costs
of delay are rising. Eight months ago, when euro-zone governments and the IMF
joined forces to rescue Greece, their determination to avoid immediate
restructuring made sense. There were reasonable fears that default could plunge
Greece into chaos, precipitate bond crises in the euro zone and spark a European
banking catastrophe.
The European economy, as a whole, is now in better shape. Banks have had time
to build up more capital—and palm off some of their holdings of dodgy sovereign
bonds to the European Central Bank. Greece and other peripherals have shown
their mettle with austerity plans. Europe’s officials have created mechanisms to
stump up rescue money quickly. And lawyers have been thinking about managing
an “orderly” default. A sovereign restructuring could still spook financial
markets—fear that it would spread panic makes Europe’s politicians shy away
from it—but if handled correctly, it should not spawn Lehman-like chaos.
At the same time the costs of buying time with loans have become painfully clear.
The burden on the countries that have been rescued is enormous. Despite the
toughest fiscal adjustment by any rich country since 1945, Greece’s debt burden
will, on plausible assumptions, peak at 165% of GDP by 2014. The Irish will toil
for years to service rescue loans that, at Europe’s insistence, pay off the
bondholders of its defunct banks. At some point it will become politically
impossible to demand more austerity to pay off foreigners.
And the longer a restructuring is put off, the more painful it will eventually be,
both for any remaining bondholders and for taxpayers in the euro zone’s core.
The rescues of Greece and Ireland have increased their overall debts while their
private debts fall, so that a growing share will be owed to European governments.
That means that the write-downs in any future restructuring will be bigger. By
2015, for instance, Greece could not reduce its debt to a sustainable level even if
it wiped out the remaining private bondholders.
A cost-benefit analysis, in short, argues in favour of carrying out an orderly
restructuring now. The debt reduction should be big enough to put afflicted
economies on a sustainable path. Greece may have to halve its debt burden.
Ireland’s may need to be cut by up to a third, with some of this coming from
writing down bank rather than sovereign debt.
All creditors, including governments and the European Central Bank, will have to
chip in. New rescue money will also be needed: to fund defaulting countries’
budget deficits; to help recapitalise these countries’ local banks (which will suffer
losses on their holdings of government bonds); and, if necessary, to recapitalise
any hard-hit banks in Europe’s core economies. The ECB and others should stand
ready to defend Belgium, Italy and Spain if need be.
If Europe’s leaders stick to plan A, the debt crisis will continue to deepen. If they
get on with restructurings that are eventually inevitable, they have a fighting
chance of putting the crisis behind them. Plan B will require deft technical
management and political courage. Thanks to its emerging-market expertise, the
IMF has some of the former. It is up to Europe’s politicians to find the latter.
The euro area’s bail-out strategy is not working. It is time for insolvent
countries to restructure their debts
For a few weeks over the Christmas holidays, Europeans put their sovereign-debt
crisis on hold. Now they are facing grim reality once more. Bond yields are
spiking in an ever broader group of countries, just as the euro zone’s
governments need to raise vast sums from the markets. On January 12th
Portugal was forced to pay 6.7% for ten-year money—better than feared but a
price it cannot afford for long. Yields for Belgian debt have jumped, as investors
fret about its load of debt and lack of leadership. Spain is hanging on.
This mess leads to a depressing conclusion: Europe’s bail-out strategy, designed
to calm financial markets and place a firewall between the euro zone’s periphery
and its centre, is failing. Investors are becoming more, not less, nervous, and the
crisis is spreading. Plan A, based on postponing the restructuring of Europe’s
struggling countries, was worth trying: it has bought some time. But it is no
longer working. Restructuring now is more clearly affordable than it was last
year. It is also surely cheaper for everybody than it will be in a few years’ time.
Hence the need for Plan B.
The initial response, forged in the rescue of Greece in May 2010, has been
undone by its own contradiction. Europe’s politicians have created a system for
making loans to prevent illiquid governments from defaulting in the short term,
while simultaneously making clear (at Germany’s insistence) that in the medium
term insolvent countries should have their debts restructured. Unsure about who
will eventually be deemed insolvent, investors are nervous—and costs have risen.
The least-bad way to deal with this contradiction is to restructure the debt of
plainly insolvent countries now. Italy and Belgium have high debt levels but more
ample private savings, and their underlying budgets are closer to surplus. There
is, thus, a reasonable chance that, handled correctly, euro-zone sovereign
defaults could be limited to three small, peripheral economies.
The perils of procrastination
This newspaper does not advocate the first rich-country sovereign defaults in half
a century lightly. But the logic for taking action sooner rather than later is
powerful. First, the only plausible long-term alternative to debt restructuring—
permanent fiscal transfer from Europe’s richer core seems to be a political non-
starter. Some of Europe’s politicians favour closer fiscal union, including issuing
euro bonds, but they are unlikely to accept budget transfers big enough to
underwrite the peripheral economies’ entire debt stock.
Second, the dangers from debt restructuring have diminished even as the costs
of delay are rising. Eight months ago, when euro-zone governments and the IMF
joined forces to rescue Greece, their determination to avoid immediate
restructuring made sense. There were reasonable fears that default could plunge
Greece into chaos, precipitate bond crises in the euro zone and spark a European
banking catastrophe.
The European economy, as a whole, is now in better shape. Banks have had time
to build up more capital—and palm off some of their holdings of dodgy sovereign
bonds to the European Central Bank. Greece and other peripherals have shown
their mettle with austerity plans. Europe’s officials have created mechanisms to
stump up rescue money quickly. And lawyers have been thinking about managing
an “orderly” default. A sovereign restructuring could still spook financial
markets—fear that it would spread panic makes Europe’s politicians shy away
from it—but if handled correctly, it should not spawn Lehman-like chaos.
At the same time the costs of buying time with loans have become painfully clear.
The burden on the countries that have been rescued is enormous. Despite the
toughest fiscal adjustment by any rich country since 1945, Greece’s debt burden
will, on plausible assumptions, peak at 165% of GDP by 2014. The Irish will toil
for years to service rescue loans that, at Europe’s insistence, pay off the
bondholders of its defunct banks. At some point it will become politically
impossible to demand more austerity to pay off foreigners.
And the longer a restructuring is put off, the more painful it will eventually be,
both for any remaining bondholders and for taxpayers in the euro zone’s core.
The rescues of Greece and Ireland have increased their overall debts while their
private debts fall, so that a growing share will be owed to European governments.
That means that the write-downs in any future restructuring will be bigger. By
2015, for instance, Greece could not reduce its debt to a sustainable level even if
it wiped out the remaining private bondholders.
A cost-benefit analysis, in short, argues in favour of carrying out an orderly
restructuring now. The debt reduction should be big enough to put afflicted
economies on a sustainable path. Greece may have to halve its debt burden.
Ireland’s may need to be cut by up to a third, with some of this coming from
writing down bank rather than sovereign debt.
All creditors, including governments and the European Central Bank, will have to
chip in. New rescue money will also be needed: to fund defaulting countries’
budget deficits; to help recapitalise these countries’ local banks (which will suffer
losses on their holdings of government bonds); and, if necessary, to recapitalise
any hard-hit banks in Europe’s core economies. The ECB and others should stand
ready to defend Belgium, Italy and Spain if need be.
If Europe’s leaders stick to plan A, the debt crisis will continue to deepen. If they
get on with restructurings that are eventually inevitable, they have a fighting
chance of putting the crisis behind them. Plan B will require deft technical
management and political courage. Thanks to its emerging-market expertise, the
IMF has some of the former. It is up to Europe’s politicians to find the latter.
EUROPEAN UNION'S FOREIGN POLICY - THE TEST FOR ASHTON & EUROPE
The EU's foreign policy: The test for Ashton and Europe
Foreign affairs is back at the forefront of the European Union, for the moment at
least. The euro crisis is in a chronic rather than an acute phase, and no big
decisions on the euro are expected at summit. Time, then, to consider the
political crises around the EU’s rim, from Belarus’s rigged election and violent
suppression of opposition protests, to unrest in Albania and, of course, the spread
of the anti-government protests—the “jasmine revolution”—across North Africa
and the Middle East.
These represent a big test of the ability of the External Action Service, the EU’s
“foreign ministry” headed by Catherine Ashton, to respond to unexpected events.
Twice, the baroness spoke before the cameras. On the way to a meeting for
foreign ministers in Brussels, she made no mention of the need for Egypt to hold
“free and fair elections”. Only at the end of the meeting did she come forward
with this exhortation.
One draws two lessons from this. First, for a foreign minister Baroness Ashton is
strangely allergic to the media, especially what her officials call the “Brussels
bubble". She has reluctantly had to step into its the limelight because of the
pressure of events and because of complaints about her lack of visibility. French
papers have resumed the stream of criticism of the baroness, whether for
allegedly stitching-up top jobs (in French) in favour of Britain and its allies, or
because of her alleged lack of vision. “Mme Ashton est nulle” (“Mrs Ashton is
useless”), Le Monde reports (in French) one senior French official as saying.
Second, she is averse to sharing leadership with her fellow foreign ministers.
Even as the Americans had shifted their position at the weekend to call for an
orderly transition to democracy in Egypt, and even after the leaders of Britain,
France and Germany issued a joint letter calling for elections, Mrs Ashton was
reluctant to call for a free ballot. Diplomats say this is because she feared she did
not yet have consensus among the 27 states. Is this admirable respect for
smaller member states, who had not yet expressed themselves, or is it a
worrying timidity?
The statements issued at the end of the meeting offer some intriguing contrasts.
The foreign ministers announced a visa ban and asset freeze against senior
Belarussian officials and confirmed similar measures against the Ivory Coast’s
president, Laurent Gbagbo, and his entourage. They announced their intention to
impose “restrictive measures” on members of Tunisia’s former regime. Officials
say this means a freeze of assets, starting with those of ex-president Zine al-
Abidine Ben Ali and his wife, Leila Trabelsi. “The council salutes the courage and
determination of the Tunisian people and its peaceful struggle for its rights and
democratic aspirations,” said the ministers.
The words for Egyptian demonstrators were more guarded. “The council
recognizes the legitimate democratic aspirations and grievances of the Egyptian
population. These should be listened to carefully and addressed through urgent,
concrete and decisive measures.” There were no sanctions imposed on President
Hosni Mubarak, even though scores of protesters have been killed by his security
forces and even though his rule has been far from democratic.
Why the difference? In part, this is because Tunisia’s leader has fled and the
current government has asked for the seizure of his assets, while Mr Mubarak
remains in office. In part, also, the reason is that Tunisia is seen as much more
secular than Egypt. There is an unmistakeable worry that the main beneficiaries
of a genuinely free and fair election in Egypt would be the Muslim Brotherhood.
The Egyptian wing of the movement today proclaims itself to be peaceful and
democratic, but the Brotherhood has in the past produced violent jihadist
offshoots. The Palestinian branch of the Brotherhood, Hamas, turned violent in
the 1990s and popularised the use of suicide bombings—and then won Palestinian
elections. It still runs the Gaza strip, despite Israel’s blockade.
Israel is plainly alarmed by the prospect of Islamists taking power on their
border, even though its prime minister, Benjamin Netanyahu, was once a loud
advocate of democracy in the Arab world, calling it a precondition for peace.
William Hague, Britain’s foreign secretary, concedes that the situation is “fraught
with danger” but argues that, in the end, the outside world had to show “faith in
democracy”.
Foreign affairs is back at the forefront of the European Union, for the moment at
least. The euro crisis is in a chronic rather than an acute phase, and no big
decisions on the euro are expected at summit. Time, then, to consider the
political crises around the EU’s rim, from Belarus’s rigged election and violent
suppression of opposition protests, to unrest in Albania and, of course, the spread
of the anti-government protests—the “jasmine revolution”—across North Africa
and the Middle East.
These represent a big test of the ability of the External Action Service, the EU’s
“foreign ministry” headed by Catherine Ashton, to respond to unexpected events.
Twice, the baroness spoke before the cameras. On the way to a meeting for
foreign ministers in Brussels, she made no mention of the need for Egypt to hold
“free and fair elections”. Only at the end of the meeting did she come forward
with this exhortation.
One draws two lessons from this. First, for a foreign minister Baroness Ashton is
strangely allergic to the media, especially what her officials call the “Brussels
bubble". She has reluctantly had to step into its the limelight because of the
pressure of events and because of complaints about her lack of visibility. French
papers have resumed the stream of criticism of the baroness, whether for
allegedly stitching-up top jobs (in French) in favour of Britain and its allies, or
because of her alleged lack of vision. “Mme Ashton est nulle” (“Mrs Ashton is
useless”), Le Monde reports (in French) one senior French official as saying.
Second, she is averse to sharing leadership with her fellow foreign ministers.
Even as the Americans had shifted their position at the weekend to call for an
orderly transition to democracy in Egypt, and even after the leaders of Britain,
France and Germany issued a joint letter calling for elections, Mrs Ashton was
reluctant to call for a free ballot. Diplomats say this is because she feared she did
not yet have consensus among the 27 states. Is this admirable respect for
smaller member states, who had not yet expressed themselves, or is it a
worrying timidity?
The statements issued at the end of the meeting offer some intriguing contrasts.
The foreign ministers announced a visa ban and asset freeze against senior
Belarussian officials and confirmed similar measures against the Ivory Coast’s
president, Laurent Gbagbo, and his entourage. They announced their intention to
impose “restrictive measures” on members of Tunisia’s former regime. Officials
say this means a freeze of assets, starting with those of ex-president Zine al-
Abidine Ben Ali and his wife, Leila Trabelsi. “The council salutes the courage and
determination of the Tunisian people and its peaceful struggle for its rights and
democratic aspirations,” said the ministers.
The words for Egyptian demonstrators were more guarded. “The council
recognizes the legitimate democratic aspirations and grievances of the Egyptian
population. These should be listened to carefully and addressed through urgent,
concrete and decisive measures.” There were no sanctions imposed on President
Hosni Mubarak, even though scores of protesters have been killed by his security
forces and even though his rule has been far from democratic.
Why the difference? In part, this is because Tunisia’s leader has fled and the
current government has asked for the seizure of his assets, while Mr Mubarak
remains in office. In part, also, the reason is that Tunisia is seen as much more
secular than Egypt. There is an unmistakeable worry that the main beneficiaries
of a genuinely free and fair election in Egypt would be the Muslim Brotherhood.
The Egyptian wing of the movement today proclaims itself to be peaceful and
democratic, but the Brotherhood has in the past produced violent jihadist
offshoots. The Palestinian branch of the Brotherhood, Hamas, turned violent in
the 1990s and popularised the use of suicide bombings—and then won Palestinian
elections. It still runs the Gaza strip, despite Israel’s blockade.
Israel is plainly alarmed by the prospect of Islamists taking power on their
border, even though its prime minister, Benjamin Netanyahu, was once a loud
advocate of democracy in the Arab world, calling it a precondition for peace.
William Hague, Britain’s foreign secretary, concedes that the situation is “fraught
with danger” but argues that, in the end, the outside world had to show “faith in
democracy”.
OBAMA'S STATE OF UNION IN TROUBLED STATE
The union's troubled state
In a show of civility prompted by the dreadful shootings in Tucson, Republicans
and Democrats sat side by side to hear Barack Obama’s state-of-the-union
message. But that truce could not hide the fact that the two sides have starkly
different analyses of what has gone wrong in America. And in so far as either side
has solutions to offer (which is sadly not very far), these are starkly different,
too. Everyone pretends to be in favour of bipartisan dialogue, but it is a dialogue
of the deaf.
America faces two huge, linked problems. Its unemployment rate is running at
9.4%; once you add in those who want full-time work but can find only part-time
jobs, it is almost twice that. Job creation is not even keeping pace with the rise in
population. And the budget deficit is running at almost 10% of GDP; on that
measure this year and the previous two will have been the three worst since the
second world war.
To the Republicans who now control the House of Representatives, the main
problem is the deficit and the cumulative burden of debt it brings with it. The
deficit will of course narrow as the economy recovers, but because of the
insatiable demands for health care of America’s now-creaky and retiring baby-
boomers, unless taxes are hiked it will not dip below 4% of GDP, and it will start
to rise again after 2015. That is not sustainable. Not only will borrowing on this
scale tend to crowd out more productive investment: the interest on it is already
eating up 10% of government revenue, a figure that will rise as interest rates go
up. Hence the Republican demand for swift and deep cuts. Get spending down,
shift government off the backs of the people, and jobs will return, as the invisible
hand works its magic.
Mr Obama sees things the opposite way round. His state-of-the-union speech was
an attempt to place jobs—which, according to pollsters, most Americans say are
their priority—at the forefront of the debate, and he put the deficit at the end of a
long list of concerns. After two years in which he concentrated more than was
wise on getting health reform passed, refocusing on jobs makes some sense. It is
obviously true that America’s infrastructure, both human and physical, is sub-par
(its children’s maths skills were recently placed 25th out of 34 in a ranking of
OECD countries). And it is hard to reduce the deficit while the country has a large
group of persistently un- or underemployed people.
But two large difficulties arise. First, neither Mr Obama nor the Republicans has a
workable plan for dealing with even their own main concern; and second, neither
side seems interested in dealing with the other’s priority. This is not a recipe for a
productive partnership.
Mr Obama claimed that America needs to “out-innovate, out-educate and
outbuild the rest of the word”. Yet his speech provided only the waffliest of ideas
about how it might do that, and no indication of how they might be paid for. The
parallel he likes to draw with the moment when Sputnik was launched and
America realised Russia was winning the space race falls down there, for in 1957
America’s government had piles of cash to spend on catching up. Now it has
none.
True, some of the measures Mr Obama talked about this week, such as rewarding
schools for holding poor teachers more accountable, should not cost much. But
others—such as bringing high-speed rail to 80% of Americans and broadband
internet to 98% of them—will. And the federal government’s record suggests the
money may not be well spent: a report by the World Economic Forum puts
America at 68th in the world for the effectiveness of its public-sector spending.
Mr Obama also said far too little about what most concerns Republicans and what
led to his party’s defeat at the mid-terms: the deficit. Cutting hard this year is too risky; but laying out a concrete set of proposals on how to get the budget back
into shape from 2012 onwards is essential.
A year ago Mr Obama set up a deficit-reduction commission, which duly produced
a sensible report at the end of last year. He has failed previously, and failed again
this week, to endorse the commission’s conclusions. He offered no specific
proposals for cutting the cost of the biggest drains on the federal purse: health
care, Social Security (pensions) and defence. And, although revenues will have to
rise if the budget is to be brought into balance, he failed to explain to middle-
class Americans that they will have to pay more tax. His only gestures in the
direction of fiscal responsibility were to propose reforming corporate tax,
increasing some taxes on the very rich and extending a freeze on some
categories of discretionary spending, all of them tiny parts of the overall picture.
If he is serious about the deficit, this was the time to show it. He should have
taken courage from recent improvements in both his poll ratings and the
economy. He copped out.
For their part, the Republicans have made it clear that they have no interest in Mr
Obama’s plans to spend or invest more money. Given that they are supposed to
be the party of fiscal rectitude, that is understandable. But they, too, are failing
in their main brief, having neglected to come up with a plan for dealing with the
long-term problem caused by entitlements. The only medicine they propose is
cuts of 20% and more on parts of the “non-security discretionary” bits of the
budget (ie, on only about 17% of it) which would succeed in causing a lot of pain
while failing to solve the problem.
Both parties’ ideas are rotten, but the collision between them looks like being
worse. On March 4th the federal government will run out of money unless
Congress first passes a bill voting more; a few weeks after that, it will bump up
against the federal debt ceiling, now set at an apparently insufficient $14.3
trillion, unless, again, Congress votes to increase it. Both measures must be
passed by a House of Representatives now firmly in Republican hands, and also
require the support of seven or more Republican senators. The Republicans have
vowed to exact deep spending cuts in return for their assent. The president will
not accept these. The stage is set for a savage spring.
In a show of civility prompted by the dreadful shootings in Tucson, Republicans
and Democrats sat side by side to hear Barack Obama’s state-of-the-union
message. But that truce could not hide the fact that the two sides have starkly
different analyses of what has gone wrong in America. And in so far as either side
has solutions to offer (which is sadly not very far), these are starkly different,
too. Everyone pretends to be in favour of bipartisan dialogue, but it is a dialogue
of the deaf.
America faces two huge, linked problems. Its unemployment rate is running at
9.4%; once you add in those who want full-time work but can find only part-time
jobs, it is almost twice that. Job creation is not even keeping pace with the rise in
population. And the budget deficit is running at almost 10% of GDP; on that
measure this year and the previous two will have been the three worst since the
second world war.
To the Republicans who now control the House of Representatives, the main
problem is the deficit and the cumulative burden of debt it brings with it. The
deficit will of course narrow as the economy recovers, but because of the
insatiable demands for health care of America’s now-creaky and retiring baby-
boomers, unless taxes are hiked it will not dip below 4% of GDP, and it will start
to rise again after 2015. That is not sustainable. Not only will borrowing on this
scale tend to crowd out more productive investment: the interest on it is already
eating up 10% of government revenue, a figure that will rise as interest rates go
up. Hence the Republican demand for swift and deep cuts. Get spending down,
shift government off the backs of the people, and jobs will return, as the invisible
hand works its magic.
Mr Obama sees things the opposite way round. His state-of-the-union speech was
an attempt to place jobs—which, according to pollsters, most Americans say are
their priority—at the forefront of the debate, and he put the deficit at the end of a
long list of concerns. After two years in which he concentrated more than was
wise on getting health reform passed, refocusing on jobs makes some sense. It is
obviously true that America’s infrastructure, both human and physical, is sub-par
(its children’s maths skills were recently placed 25th out of 34 in a ranking of
OECD countries). And it is hard to reduce the deficit while the country has a large
group of persistently un- or underemployed people.
But two large difficulties arise. First, neither Mr Obama nor the Republicans has a
workable plan for dealing with even their own main concern; and second, neither
side seems interested in dealing with the other’s priority. This is not a recipe for a
productive partnership.
Mr Obama claimed that America needs to “out-innovate, out-educate and
outbuild the rest of the word”. Yet his speech provided only the waffliest of ideas
about how it might do that, and no indication of how they might be paid for. The
parallel he likes to draw with the moment when Sputnik was launched and
America realised Russia was winning the space race falls down there, for in 1957
America’s government had piles of cash to spend on catching up. Now it has
none.
True, some of the measures Mr Obama talked about this week, such as rewarding
schools for holding poor teachers more accountable, should not cost much. But
others—such as bringing high-speed rail to 80% of Americans and broadband
internet to 98% of them—will. And the federal government’s record suggests the
money may not be well spent: a report by the World Economic Forum puts
America at 68th in the world for the effectiveness of its public-sector spending.
Mr Obama also said far too little about what most concerns Republicans and what
led to his party’s defeat at the mid-terms: the deficit. Cutting hard this year is too risky; but laying out a concrete set of proposals on how to get the budget back
into shape from 2012 onwards is essential.
A year ago Mr Obama set up a deficit-reduction commission, which duly produced
a sensible report at the end of last year. He has failed previously, and failed again
this week, to endorse the commission’s conclusions. He offered no specific
proposals for cutting the cost of the biggest drains on the federal purse: health
care, Social Security (pensions) and defence. And, although revenues will have to
rise if the budget is to be brought into balance, he failed to explain to middle-
class Americans that they will have to pay more tax. His only gestures in the
direction of fiscal responsibility were to propose reforming corporate tax,
increasing some taxes on the very rich and extending a freeze on some
categories of discretionary spending, all of them tiny parts of the overall picture.
If he is serious about the deficit, this was the time to show it. He should have
taken courage from recent improvements in both his poll ratings and the
economy. He copped out.
For their part, the Republicans have made it clear that they have no interest in Mr
Obama’s plans to spend or invest more money. Given that they are supposed to
be the party of fiscal rectitude, that is understandable. But they, too, are failing
in their main brief, having neglected to come up with a plan for dealing with the
long-term problem caused by entitlements. The only medicine they propose is
cuts of 20% and more on parts of the “non-security discretionary” bits of the
budget (ie, on only about 17% of it) which would succeed in causing a lot of pain
while failing to solve the problem.
Both parties’ ideas are rotten, but the collision between them looks like being
worse. On March 4th the federal government will run out of money unless
Congress first passes a bill voting more; a few weeks after that, it will bump up
against the federal debt ceiling, now set at an apparently insufficient $14.3
trillion, unless, again, Congress votes to increase it. Both measures must be
passed by a House of Representatives now firmly in Republican hands, and also
require the support of seven or more Republican senators. The Republicans have
vowed to exact deep spending cuts in return for their assent. The president will
not accept these. The stage is set for a savage spring.
ECONOMIC TERMS
Deflation: Deflation is a reduction in the level of national income and output,
usually accompanied by a fall in the general price level.
Dumping occurs when goods are exported at a price less than their normal
value, generally meaning they are exported for less than they are sold in the
domestic market or third country markets, or at less than production cost.
Direct investment: Foreign capital inflow in the form of investment by foreign-
based companies into domestic based companies. Portfolio investment is foreign
capital inflow by foreign investors into shares and financial securities. It is the
ownership and management of production and/or marketing facilities in a foreign
country.
Direct tax: A tax that you pay directly, as opposed to indirect taxes, such as
tariffs and business taxes. The income tax is a direct tax, as are property taxes.
Double taxation: Corporate earnings taxed at both the corporate level and
again as a stockholder dividend.
Economic growth: Quantitative measure of the change in size/volume of
economic activity, usually calculated in terms of gross national product (GNP) or
gross domestic product(GDP).
Duopoly: A market structure in which two producers of a commodity compete
with each other.
Econometrics: The application of statistical and mathematical methods in the
field of economics to test and quantify economic theories and the solutions to
economic problems.
Economic growth: An increase in the nation's capacity to produce goods and
services.
Economic infrastructure: The underlying amount of physical and financial
capital embodied in roads, railways, waterways, airways, and other forms of
transportation and communication plus water supplies, financial institutions,
electricity, and public services such as health and education. The level of
infrastructural development in a country is a crucial factor determining the pace
and diversity of economic development.
Economic integration: The merging to various degrees of the economies and
economic policies of two or more countries in a given region.
Economic policy: A statement of objectives and the methods of achieving these
objectives (policy instruments) by government, political party, business concern,
etc. Some examples of government economic objectives are maintaining full
employment, achieving a high rate of economic growth, reducing income
inequalities and regional development inequalities, and maintaining price stability.
Policy instruments include fiscal policy, monetary and financial policy, and
legislative controls (e.g., price and wage control, rent control).
Elasticity of demand: The degree to which consumer demand for a product or
service responds to a change in price, wage or other independent variable. When
there is no perceptible response, demand is said to be inelastic.
Excess capacity: Volume or capacity over and above that which is needed to
meet peak planned or expected demand.
Excess demand: The situation in which the quantity demanded at a given price
exceeds the quantity supplied.
Exchange control: A governmental policy designed to restrict the outflow of
domestic currency and prevent a worsened balance of payments position by
controlling the amount of foreign exchange that can be obtained or held by
domestic citizens. Often results from overvalued exchange rates.
Exchange rate: The price of one currency stated in terms of another currency,
when exchanged.
Export incentives: Public subsidies, tax rebates, and other kinds of financial and
nonfinancial measures designed to promote a greater level of economic activity in
export industries.
Exports: The value of all goods and nonfactor services sold to the rest of the
world; they include merchandise, freight, insurance, travel, and other nonfactor
services. The value of factor services (such as investment receipts and workers'
remittances from abroad) is excluded from this measure.
Externalities: A cost or benefit not accounted for in the price of goods or
services. Often "externality" refers to the cost of pollution and other
environmental impacts.
usually accompanied by a fall in the general price level.
Dumping occurs when goods are exported at a price less than their normal
value, generally meaning they are exported for less than they are sold in the
domestic market or third country markets, or at less than production cost.
Direct investment: Foreign capital inflow in the form of investment by foreign-
based companies into domestic based companies. Portfolio investment is foreign
capital inflow by foreign investors into shares and financial securities. It is the
ownership and management of production and/or marketing facilities in a foreign
country.
Direct tax: A tax that you pay directly, as opposed to indirect taxes, such as
tariffs and business taxes. The income tax is a direct tax, as are property taxes.
Double taxation: Corporate earnings taxed at both the corporate level and
again as a stockholder dividend.
Economic growth: Quantitative measure of the change in size/volume of
economic activity, usually calculated in terms of gross national product (GNP) or
gross domestic product(GDP).
Duopoly: A market structure in which two producers of a commodity compete
with each other.
Econometrics: The application of statistical and mathematical methods in the
field of economics to test and quantify economic theories and the solutions to
economic problems.
Economic growth: An increase in the nation's capacity to produce goods and
services.
Economic infrastructure: The underlying amount of physical and financial
capital embodied in roads, railways, waterways, airways, and other forms of
transportation and communication plus water supplies, financial institutions,
electricity, and public services such as health and education. The level of
infrastructural development in a country is a crucial factor determining the pace
and diversity of economic development.
Economic integration: The merging to various degrees of the economies and
economic policies of two or more countries in a given region.
Economic policy: A statement of objectives and the methods of achieving these
objectives (policy instruments) by government, political party, business concern,
etc. Some examples of government economic objectives are maintaining full
employment, achieving a high rate of economic growth, reducing income
inequalities and regional development inequalities, and maintaining price stability.
Policy instruments include fiscal policy, monetary and financial policy, and
legislative controls (e.g., price and wage control, rent control).
Elasticity of demand: The degree to which consumer demand for a product or
service responds to a change in price, wage or other independent variable. When
there is no perceptible response, demand is said to be inelastic.
Excess capacity: Volume or capacity over and above that which is needed to
meet peak planned or expected demand.
Excess demand: The situation in which the quantity demanded at a given price
exceeds the quantity supplied.
Exchange control: A governmental policy designed to restrict the outflow of
domestic currency and prevent a worsened balance of payments position by
controlling the amount of foreign exchange that can be obtained or held by
domestic citizens. Often results from overvalued exchange rates.
Exchange rate: The price of one currency stated in terms of another currency,
when exchanged.
Export incentives: Public subsidies, tax rebates, and other kinds of financial and
nonfinancial measures designed to promote a greater level of economic activity in
export industries.
Exports: The value of all goods and nonfactor services sold to the rest of the
world; they include merchandise, freight, insurance, travel, and other nonfactor
services. The value of factor services (such as investment receipts and workers'
remittances from abroad) is excluded from this measure.
Externalities: A cost or benefit not accounted for in the price of goods or
services. Often "externality" refers to the cost of pollution and other
environmental impacts.
ADITYA BIRLA GROUP ACQUIRED COLUMBIAN CHEMICALS COMPANY
Aditya Birla buys US co for $875m
Kumar Mangalam Birla-led Aditya Birla Group has acquired Atlanta-based
Columbian Chemicals Company from One Equity Partners, the merchant banking
arm of JP Morgan Chase, for $875 million (about Rs 4,016 crore), catapulting the
Indian major into the largest global producer of carbon black by volume.
This is Aditya Birla Group's second largest overseas buy after the $6-billion
acquisition of Canada-based aluminum company Novelis in 2007. The deal, which
gives the group's carbon black business a truly global presence, is also the largest
cross-border transaction to have kicked in this calendar year. To be completed by
mid-2011, the deal would bolster AV Birla Group's combined carbon black
capacity to 2 million tonne, toppling Cabot from its dominant position (1.9 million
tonne). Post acquisition, the turnover of the group's carbon black business will go
up from $900 million to $ 2billion. With Aditya Birla Group adding 2.50 lakh tonne
capacity, it is expected to widen the gap with its closest rival. Carbon black is a
fine powder used in the rubber industry for tyres and as pigments for paints and
inks. For the cement-to-telecom Aditya Birla Group, the Columbian acquisition is
part of its larger vision to attain dominance in each of the business the
conglomerate is present in. The Novelis purchase propelled group company,
Hindalco as the world's largest aluminum rolling company. At the same time,
UltraTech Cement is the largest cement maker in the country. "The deal is in line
with our vision to be among the top three players in a given business. The
acquisition of Columbian Chemicals is a perfect fit for Birla Carbon. Their assets
and the expertise of the team will provide a stronger platform for higher growth
and ongoing success,'' said group chairman Kumar Mangalam Birla.
Columbian Chemicals operates 11 plants in nine countries, while Birla Carbon's
operations are spread across four countries with six units. The group's carbon
black business operates under different companies. In Thailand, it is under Thai
Carbon Black, while in Egypt it is under Alexandria Carbon Company. In China, it
operates through Liaoning Birla Carbon Company, while in India it operates as a
division (Hi-Tech Carbon) under Aditya Birla Nuvo.
The group has routed the purchase of Columbian Chemicals through three
companies-Alexandria Carbon Black (41%), Thai Carbon Black (41%) and SKI
Investment (28%), a special purpose vehicle for carbon black. The deal is
completely funded through debt taken from five foreign banks-ANZ, BankAm,
HSBC, RBS and StanChart. "We have taken a fresh debt. The loan has been taken
on a tenure of 5-7 years and will be repaid from the cash flows among the three
companies or refinanced at a later date,'' D Muthukumaran, head, group
corporate finance, AV Birla group, told. The urgency with which the group has
pursued the globalization agenda for carbon black stems from the keenness of
global tyre companies that the group establishes a presence in markets like North
America and Europe. With the automobile market growing at a rapid pace, there
is good demand being generated for tyres as well. Globally, 70% of the carbon
black produced is used in the manufacture of tyres. Nearly 60% of this is
consumed by the three leading tyre makers-Bridgestone, Goodyear and Michelin.
The AV Birla group, which is among the strategic suppliers to the tyre companies,
will get a further boost in its preferred supplier status from the acquisition of
Columbian Chemicals.
"Most of the large tyre companies have operations in North America and
European markets. They would prefer any supplier to supply them in those
markets. Earlier, some of our competitors had that advantage. We didn't have it.
We were earlier a regional supplier and this deal makes us a truly global supplier
to the tyre companies,'' said Santrupt Misra, CEO, Birla Carbon and director, HR,
AV Birla group. As for the tyre industry, there is a growing concern for safety
which have added to the demand for better quality products. This aspect seems
to have gone in AV Birla group's favour.
Kumar Mangalam Birla-led Aditya Birla Group has acquired Atlanta-based
Columbian Chemicals Company from One Equity Partners, the merchant banking
arm of JP Morgan Chase, for $875 million (about Rs 4,016 crore), catapulting the
Indian major into the largest global producer of carbon black by volume.
This is Aditya Birla Group's second largest overseas buy after the $6-billion
acquisition of Canada-based aluminum company Novelis in 2007. The deal, which
gives the group's carbon black business a truly global presence, is also the largest
cross-border transaction to have kicked in this calendar year. To be completed by
mid-2011, the deal would bolster AV Birla Group's combined carbon black
capacity to 2 million tonne, toppling Cabot from its dominant position (1.9 million
tonne). Post acquisition, the turnover of the group's carbon black business will go
up from $900 million to $ 2billion. With Aditya Birla Group adding 2.50 lakh tonne
capacity, it is expected to widen the gap with its closest rival. Carbon black is a
fine powder used in the rubber industry for tyres and as pigments for paints and
inks. For the cement-to-telecom Aditya Birla Group, the Columbian acquisition is
part of its larger vision to attain dominance in each of the business the
conglomerate is present in. The Novelis purchase propelled group company,
Hindalco as the world's largest aluminum rolling company. At the same time,
UltraTech Cement is the largest cement maker in the country. "The deal is in line
with our vision to be among the top three players in a given business. The
acquisition of Columbian Chemicals is a perfect fit for Birla Carbon. Their assets
and the expertise of the team will provide a stronger platform for higher growth
and ongoing success,'' said group chairman Kumar Mangalam Birla.
Columbian Chemicals operates 11 plants in nine countries, while Birla Carbon's
operations are spread across four countries with six units. The group's carbon
black business operates under different companies. In Thailand, it is under Thai
Carbon Black, while in Egypt it is under Alexandria Carbon Company. In China, it
operates through Liaoning Birla Carbon Company, while in India it operates as a
division (Hi-Tech Carbon) under Aditya Birla Nuvo.
The group has routed the purchase of Columbian Chemicals through three
companies-Alexandria Carbon Black (41%), Thai Carbon Black (41%) and SKI
Investment (28%), a special purpose vehicle for carbon black. The deal is
completely funded through debt taken from five foreign banks-ANZ, BankAm,
HSBC, RBS and StanChart. "We have taken a fresh debt. The loan has been taken
on a tenure of 5-7 years and will be repaid from the cash flows among the three
companies or refinanced at a later date,'' D Muthukumaran, head, group
corporate finance, AV Birla group, told. The urgency with which the group has
pursued the globalization agenda for carbon black stems from the keenness of
global tyre companies that the group establishes a presence in markets like North
America and Europe. With the automobile market growing at a rapid pace, there
is good demand being generated for tyres as well. Globally, 70% of the carbon
black produced is used in the manufacture of tyres. Nearly 60% of this is
consumed by the three leading tyre makers-Bridgestone, Goodyear and Michelin.
The AV Birla group, which is among the strategic suppliers to the tyre companies,
will get a further boost in its preferred supplier status from the acquisition of
Columbian Chemicals.
"Most of the large tyre companies have operations in North America and
European markets. They would prefer any supplier to supply them in those
markets. Earlier, some of our competitors had that advantage. We didn't have it.
We were earlier a regional supplier and this deal makes us a truly global supplier
to the tyre companies,'' said Santrupt Misra, CEO, Birla Carbon and director, HR,
AV Birla group. As for the tyre industry, there is a growing concern for safety
which have added to the demand for better quality products. This aspect seems
to have gone in AV Birla group's favour.
CAG cannot be the only basis for cancellation of spectrum: SC
The Supreme Court made it clear that the CAG report cannot be the only basis for
cancellation of licenses for the 2G spectrum and any decision taken by the
government on the issue will be subject to the outcome of the petitions pending
before it.
"Everything they (government) do after filing of the petition, is subject to the
outcome of the petitions," a bench comprising Justices G S Singhvi and A K
Ganguly said.
"We do not know what they are doing. But if they do, it is subject to the outcome
of our order," the bench said.
The remarks by the bench came on the plea by an NGO Centre for Public Interest
Litigation (CPIL) which was seeking a direction to the government for restraining
it from regularising the license of the telecom companies which failed to meet the
roll-out obligations.
NGO's counsel Prashant Bhushan said that the government was regularising the
licenses of the companies by imposing penalties on the companies.
The bench further said, "If the licenses are going to be cancelled, it cannot be
cancelled only on the basis of the CAG report."
The Supreme Court made it clear that the CAG report cannot be the only basis for
cancellation of licenses for the 2G spectrum and any decision taken by the
government on the issue will be subject to the outcome of the petitions pending
before it.
"Everything they (government) do after filing of the petition, is subject to the
outcome of the petitions," a bench comprising Justices G S Singhvi and A K
Ganguly said.
"We do not know what they are doing. But if they do, it is subject to the outcome
of our order," the bench said.
The remarks by the bench came on the plea by an NGO Centre for Public Interest
Litigation (CPIL) which was seeking a direction to the government for restraining
it from regularising the license of the telecom companies which failed to meet the
roll-out obligations.
NGO's counsel Prashant Bhushan said that the government was regularising the
licenses of the companies by imposing penalties on the companies.
The bench further said, "If the licenses are going to be cancelled, it cannot be
cancelled only on the basis of the CAG report."
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