important news for upsc

8/13/2019 important news for upsc

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26TH AUGUST 2013 TO 01STSEPTEMBER 2013

WEEKLY CURRENT

AFFAIRS BULLETIN

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CHRONICLE IAS ACADEMY GS MAINS UPGRADATION PROGRAMME A SOLUTION TO 1250 MARKS


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[ 2 ] Week l y Cu r r en t A f f a i r s 26thAugu s t to 01stSeptember , 2013

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NATIONAL

GOI to launch zero landless programme inKerala

The zero landless programme, aimed atproviding land to landless families in the state, will

be officially kicked off on September 7 by handingover the title deeds to the first batch of families. Theprogramme will be launched by Sonia Gandhi UPAin Thiruvananthapuram. In the first phase, landwill be awarded to families in Thiruvananthapuram,Kollam, Pathanamthitta, Idukki, Kottayam,Ernakulam and Alappuzha. The selection of

beneficiaries for awarding the land in the first phasewill be undertaken at the respective districtcollectorates on August 29, 30 and 31.

More than 3,000 destitute people and nearly 7,500seriously ill and handicapped persons will be amongthe beneficiaries of the first phase of the ZeroLandless programme of the State government.About 26,750 widows, 36,110 people from theScheduled Castes, and 2,239 from the ScheduledTribes would also get three cents of land each underthe first phase of the programme. The objective of

the programme is to provide land to all the landless(estimated to be 2.33 lakh) by 2015.

The beneficiaries will be selected on basis ofseveral criteria, with those who are jobless or unableto undertake any job for livelihood, those sufferingfrom incurable diseases, those who are physicallyhandicapped, widows and scheduled castecommunities getting priority.

The C-DIT has prepared a software for choosingthe beneficiaries and they will be selected in the

presence of MPs, MLAs, district panchayatpresidents, municipal chairpersons and otherpeople's representatives concerned.

Ground water management and regulationscheme extended for the XII Plan period

The total utilizable water potential of thecountry, as assessed by the Central WaterCommission and CGWB, is 1,121 Billion CubicMeters (BCM), of which ground water constitutes431 BCM (38 percent of the potential), with balance

690 BCM (62 percent) being surface water. About 61percent of irrigation water, 85 percent of rural and45 percent of urban drinking water supply is fromground water resources.

The focus on development of ground waterresources to fulfill irrigation and drinking waterneeds has often resulted in drawal of ground water

beyond sustainable limits, resulting in water levelsdeclining at a rate even up to fourmetres annually,in some parts of the country. Over-drawal of groundwater is also causing deterioration in its quality.Though the overall stage of ground waterexploitation in the country is 61 percent (as on 2009),there are States where the stage of exploitation hascrossed 100 percent (Delhi, Haryana, Punjab and

Rajasthan). Out of 5,842 assessment units (blocks/mandals/taluks) in the country, 802 have beencategorized as over-exploited.

Ever increasing demands on limited waterresources necessitates proper management of groundwater to offset the problems of over-exploitation,contamination as also to balance its demand / supplyfor inter and intra sectoral uses. This requires aproper mapping of the ground water repositories -aquifers and then developing a management plan.

The XII Plan document envisages a paradigmshift to management and comprehensive mappingof India`s aquifers as a precursor to a soundgroundwater management program. The NationalWater Policy (2012) has also laid emphasis on aquifermapping.

Thus the Cabinet Committee on Economic Affairsgave its approval for continuing the scheme ofGround Water Management and Regulation withnew components of aquifer mapping andparticipatory ground water management by the

Ministry of Water Resources (MoWR). The schemeinvolves an expenditure of Rs. 3,319crore during theXII Plan period.

The scheme will be implemented in parts of 28States and 7 Union Territories (including NCT ofDelhi) of the country covering 8.89 lakh sq km duringthe XII Plan period. The remaining mapable area of14.36 lakh sq km will be taken up in the XIII Planperiod.

Aquifer Management Plans will be formulated,quantifying water availability and water quality in

various aquifers for facilitating sustainablemanagement of ground water resources through theparticipatory management approach. Capacity


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Week l y Cu r r en t A f f a i r s 26thAugu s t to 01stSeptember , 2013 [3]

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building of functi onar ies of Panchayati Ra jInstitutions (PRIs), local community, grass rootworkers, Kisan Vikas Kendras (KVKs) will beundertaken to train them in basic data collectionand interpretation.

SC ruled out Compromise in rape cases asillegal

An apex court bench of Chief Justice P.Sathasivam, Justice Ranjana Prakash Desai and

Justice Ranjan Gogoi ruled that such compromises,if entered into, are per se illegal and the provisionfor lesser punishment for heinous offences inexceptional cases cannot be treated in a casual or acavalier manner by the trial court.

The apex court expressed grave concern that inrecent times, despite a spurt in rape cases, there has

been an increasing tendency amongst trial courts to

permit compromises of such offences on the groundthat a settlement has been entered into between therapist and the victim.

Chief Justice Sathasivam, who authored thejudgment stated: "Religion, race, caste, economic orsocial status of the accused or victim or the longpendency of the criminal trial or offer of the rapistto marry the victim or the victim is married andsettled in life cannot be construed as special factorsfor reducing the sentence prescribed by the statute."

The judges said the apex court in the past hadnoted that "few subordinate and high courts havereduced the sentence of the accused to the periodalready undergone to suffice as the punishment, bytaking aid of the proviso to Section 376(2) IPC". Thecourt described this trend insensitive and stated thatthe above trend exhibits stark insensitivity to theneed for proportionate punishments to be imposedin such cases. The power under the proviso shouldnot be used indiscriminately in a routine, casual andcavalier manner for the reason that an exception

clause requires strict interpretation.The court further stated that a compromise

entered into between the parties cannot be construedas a leading factor based on which lesser punishmentcan be awarded. Rape is a non-compoundableoffence and it is an offence against the society andis not a matter to be left for the parties to compromiseand settle.

Since the court cannot always be assured thatthe consent given by the victim in compromisingthe case was genuine, the court said: "There is everychance that she might have been pressured by theconvicts or the trauma undergone by her all the yearsmight have compelled her to opt for a compromise.

So, in the interest of justice and to avoid unnecessarypressure/harassment to the victim, it would not besafe in considering the compromise arrived at

between the parties in rape cases to be a ground forthe court to exercise the discretionary power underthe proviso of Section 376(2) of IPC.

GOI assures minimum support price to farmersunder food security Bill

Government has assured farmers that they willcontinue to get minimum support price (MSP) evenafter implementation of the Food Security law.

According to the government, in the wake ofthe increased requirement of foodgrains forimplementation of the proposed Food Security Act,procurement operations will be further extended andmore farmers will get the benefits of MSP operations.Foodgrain requirement for the implementation of

the bill is estimated 614.3 lakh tonnes as against theexisting requirement of 563.7 lakh tonnes forTargeted Public Distribution System. Governmentprovides MSP on wheat, paddy and dozen othercommodities. MSP is fixed by the Commission forAgriculture Costs and Prices (CACP).

After implementation of the proposed Act, about75 % persons in villages will get wheat at the rate ofRs. 2 and rice at the rate of Rs. 3 per kg. But farmerswill get more for their produce i.e. Rs.12.85 per kg

for wheat and Rs.12.50 per kg for paddy as minimumsupport price.

Access to highly subsidized foodgrains to smallfarmers under proposed Food Security Act andassured MSP for their produce will ease the burdenon their earnings and allow them the option to spendthe money so saved on other necessities. Hence itwill help to improve their quality of life. Therefore,contrary to dissuading farmers from producing more,the Act will in fact encourage them to produce more.

Two-third of the population will become legally

entitled to receive highly subsidized food grains afterthe enactment of the Food Security Bill. Each entitledperson will receive 5 kg of food grains per monthi.e. rice, wheat or coarse grains at Rs.3, Rs.2 and Re.1 per kg respectively. The poorest of the poor willcontinue to get 35 kg food grains per household permonth under AAY. The bill has special focus onnutritional needs of women and children. The eldestwoman of the household above 18 years isconsidered the head of the household for the purposeof issue of ration cards as per provisions of the Bill.Pregnant women and lactating mothers will getmaternity benefit of Rs. 6000 besides nutritious food.Children below 14 years of age will get food with


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higher nutritional norms. On the issue of redressinggrievances that may arise in implementation of sucha massive programme, it has been planned to givean increased role for Panchayati Raj institutions andwomens self help groups in programme-monitoringand social auditing. There will be provision forinternal grievance redressal mechanism including

call centres and helplines; and District GrievanceRedressal Officers and State Food Commission forexpeditious and effective relief to the people.

IOA diluted IOC's chargesheet clause ontainted officials

The Indian Olympic Association (IOA) hasmanaged to dilute the contentious clause whichwould bar charge-sheeted officials from contestingelections while accepting all the other amendmentsproposed by the International Olympic Committee,

clearing the decks for an early return to the Olympicfold.

Under the new clause only those who are heldguilty by a court for a jail term of two or more yearswill not be able to contest elections.

If the amendments agreed to in a marathonSpecial General Body Meeting of the IOA, it will bea huge reprieve for the likes of Lalit Bhanot and VK Verma who were charge-sheeted in 2010Commonwealth Games scam along with former IOA

chief Suresh Kalmadi as they will be allowed tocontest elections in that situation. The cases of thosepersons who are convicted for a jail term for lessthan two years will be referred to the EthicsCommission of the IOA and the IOA ExecutiveCommittee will take a final decision on therecommendations by Ethics Commission.

However, all the other amendments proposedby the IOC in the revised draft constitution havebeen accepted by the GBM.

The IOA decided to continue with the earlier

representation of the National Sports Federations andstate Olympic bodies in the GBM and elections. TheNSFs will have three votes while state units willhave two. Union Territories which have Assemblieswill have two votes while other UTs will have onevote. Regarding the age and tenure rules, rule thatare applied to the IOC members will apply to IOAalso. And the tenure rules proposed by the IOC butwill apply to only to three office bearers namelypresident, secretary general and treasurer. The IOAalso decided to prune down the number of ExecutiveCouncil members from existing 39 to 29 while thepresident can nominate 10 Executive Committeemembers who will not have voting rights.

The IOA will now have to wait for IOC's decisionon the amendments before the elections proposedto be held on 29th September to pave the way forIndia's return to the Olympic fold.

The GBM also constituted a three-memberElection Commission for the 29th September polls.Retired Justices M R Kalra, S N Sapra and Lokeshwar

Prasad will be the members. The first is the retiredChief Justice of Rajasthan high court while the othertwo were Delhi high court Justices.

Working womenshouldbe given flexi workinghours: Parliamentary Panel

A Parliamentary panel has asked the Centre tomake it mandatory for all of its departments to placesingle women employees at locations closest to theirhometowns or places of their choice.

According to the parliamentary panel there is

lack of empathy and a suitable policy foraccommodating the needs of women employees whoare single mothers or single women. When suchwomen are given postings, it should be mandatorilyensured that they are placed at stations closest totheir home-towns or places of their choice.

The Parliamentary Standing Committee alsoadvised that the government should considerframing a policy to allow flexible working hours forwomen, especially those with small children, orextending them the work-from-home facility, notingthat responsibility of family continues to be one ofthe major reasons for some of them to quit their

jobs. If the government considers giving flexibleworking hours to women or young mothers, suchpolicy will help them ensure a better balance

between work and home.This would also helpretain experienced and skilled staff, preservingcommitment and loyalty, minimising the need fortraining and capacity-building of fresh recruits,thereby ensuring improved productivity and

profitability, it added.The committee, headed by Congress member in

the Rajya Sabha Shantaram Naik, noted that manycountries had adopted a policy of giving staggeredworking hours to women employees, allowing themto start and finish work early or late.In somecountries, women employees are given longermaternity leaves, part-time leaves of up to two hours

a day till the child is three years old, child-care leavewhich can be divided into periods for both parents

to take care of the child alternately, and spouse

maternity leave, among various other facilities.

The Sixth Pay Commission too had recommendedproviding special facilities to women in terms of


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introduction of flexi-time and flexi-place on a trialbasis, and options for working half-time during theperiod when their children are young.

The committee noted that most governmentdepartments did accommodate requests for gracetime to attend to infants and young children on acase-to-case basis.

Revised Civic Action Plan in Naxal Areas

The Home Ministry has tweaked its Civic ActionProgramme (CAP), which allows central armedparamilitary forces (CAPFs) to carry outdevelopment programmes in the nine-Left WingExtremism (LWE)-affected States.

They have now been asked to be individual-oriented rather than project-oriented as thisapproach will help in bridging the gap betweenlocals and security personnel more efficiently.

Under the project christened Winning Heartsand Minds, the Central Reserve Police Force andthe Border Security Force have till now beenspending funds on small projects and developmentactivities, which included building small bridges androads, implementing drinking water and irrigationscheme.

Under the revised guidelines, the security forceshave been told to spend the money, which is Rs. 20crore per annum, on welfare activities directed atindividuals and families. The CAPFs would givethem seeds and manure or livestock, donatehousehold items or help with setting up hand-pumpsso that they could live a comfortable and dignifiedlife. Other new initiatives would include organisingmedical camps and funding vocational trainingprogrammes for children of villagers, and donatingessential items for schools or health centres in

backward and remote areas.


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FAO urges Asia-Pacific to stem food lossesUnited Nations Food and Agriculture

Organization report released recently stated thataround 35 per cent of food is lost between harvestand distribution across the Asia-Pacific region,depriving millions of nutrition.

Poor production planning, a lack of storage, weaktransport systems, crop disease and parasites alsocause some 30 per cent of cereals and 42 per cent offruit and vegetables to be lost before reaching

consumers. Thus more effort is needed to raise globalawareness of the critical issue of food losses andparticularly post-harvest losses, as well as foodwaste, which is increasing.

The FAO defines loss as food which does notmake it from harvest to the market, while wasteis food thrown away by consumers, restaurants andsupermarkets a trend that increases with greaterurbanisation. The region, whose economies have

boomed in recent years, wastes substantially lessthan more developed areas such as the United States

and Europe. But the issue remains a cornerstone ofdevelopment discussions because food waste is alsoa waste of natural resources like land and water.

The FAO says that if just a quarter of the foodwasted worldwide was saved, this would be enoughto feed the 870 million people suffering from hunger,of whom 536 million live in the Asia-Pacific region.

United Nations will probe into alleged use ofchemical weapons in Syria Civil War

An agreement was concluded in Damascusbetween the Syrian government and the UnitedNations during the visit of the UN highrepresentative for disarmament, Angela Kane, toallow the UN team lead by professor AakeSellstroem to investigate allegations of chemicalweapons use in Damascus province. The team islikely to begin work from 26th August.

Syrian forces have killed more than 1300 peoplein several suburbs east and west of the capital duringthe chemical weapon attack.

The use of any chemical weapons in Syria wouldamount to a crime against humanity thus US andUK have jointly warned Syria that it would face a

INTERNATIONAL

"serious response" if it is found that Syrian forcesused chemical weapons on civilians.

The Chemical agents were found in tunnels usedby rebel fighters, and also that soldiers sufferedsuffocation" in fighting around the suburb of Jobar.

However, the Syria government has denied theuse of chemical weapons and in turn accused therebels of using chemical arms.

Whereas, Doctors without Borders claimed thatabout 355 people died last week of "neurotoxic"

symptoms.A chemi cal w eapon is any w eapon that uses

a manufactured chemi cal t o ki l l people. The fi rst

chemi cal w eapon used effect i vely i n batt l e w as

chlor i ne gas, w hi ch burns and destr oys lung ti ssue.

M odern chemi cal w eapons tend to focus on agent s

w it h much greater kil l ing power, meaning that i t

t akes a lot less of the chemi cal t o ki ll t he same

number of peopl e. M any of t hem use t he sorts of

chemi cal s found in i nsecti cides.

The Chemi cal Weapons Conventi on (CWC) isan arms contr ol agreement w hich outl aw s the

product i on, st ockpi l i ng and use of chemi cal

w eapons. It s full name is t he Conventi on on t he

Prohi b i t i on of the Devel opment , Product i on,

St ockpi l i ng and Use of Chemi cal Weapons and

on t heir Dest ructi on. The mai n obli gat ion under

t he convent i on is t he prohi bi t i on of use and

product i on of chemi cal w eapons, as w el l as the

destruct i on of all chemi cal w eapons.

Polio outbreaks frustrate eradication driveThe global effort to eradicate polio, a disease

that has been on the brink of extinction for years, isfacing serious setbacks on two continents. The virusis surging in Somalia and the Horn of Africa, whichhad been largely free of cases for several years. Anda new outbreak has begun in a part of Pakistan thata warlord declared off-limits to vaccinators 14months ago.

The African outbreak began in May with twocases of polio paralysis: one in Mogadishu, Somaliascapital, and another in the huge Dadaab refugeecamp in Kenya, where thousands of Somalis havefled fighting between Islamic militants, clan militias,


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government troops and African peacekeepers.Now there are 121 cases in the region; last year,there were only 223 in the world.

The new Pakistan outbreak is in NorthWaziristan, near the frontier with Afghanistan. It isin an area where a warlord banned poliovaccinations after it was disclosed that the CIA had

staged a hepatitis vaccination campaign in its huntfor Osama bin Laden. The warlord, Hafiz GulBahadur, banned all efforts until U.S. drone strikesended.

Although only three North Waziristan childrenhave suffered polio paralysis since then, even one

case shows that the virus is in the area and couldspread.

The new outbreaks may delay a recently

announced $5.5 billion plan to eradicate polio by

2018.To prevent the disease from reaching Mecca

during next months hajj , Saudi Arabia has tightenedits rules. Pilgrims from any country with polio casesmust be vaccinated at home and again on arrival.Last year, nearly 500,000 pilgrims were vaccinatedon arrival.

The Pakistan outbreak is particularly frustrating,because eradication had been going steadily forwarddespite the killings in December of nine vaccinators

for which some blamed the Taliban.Public health officials had counted themselves

lucky that despite simultaneous vaccination bans inNorth and South Waziristan, no polio virus was

known to be circulating in the 250,000 children inthose areas. Vaccination posts were set up on nearbyhighways and on buses and trains.

Urban hospitals packed the vaccine on ice forfamilies willing to smuggle it back to neighbours,

but it was not enough.

Before the Waziristan outbreak, Pakistan hadseen only 24 cases this year, about as many as it hadat the same point in 2012. Most were around Karachiand Peshawar, where last years killings of the

vaccinators took place and where resistance tovaccines is highest.

U.K submitting resolution against Syria at U.N.

Prime Minister David Cameron has spelt out a

series of measures to show that money has

been spent judiciously on the Syria crisis. Mr.

Cameron has been the most bellicose of the Western

alliance leaders in calling for armed intervention in

Syria in retaliation for the August 21 chemical

weapons attack, allegedly unleashed by the Bashar

Al-Assad government against unarmed civilians.

The Cameron government does not want to wait

till the United Nations forensic inspectors, currently

in Damascas, submit their report. The U.K. is

submitting a resolution to the Security Council of

the United Nations to give it the opportunity to live

up to its responsibilities on Syria.

US-UK both agreed they were in no doubt

that the Assad regime was responsible. Regime

forces were carrying out a military operation to

regain that area from the opposition at the time;

and there is no evidence that the opposition has the

capability to deliver such a chemical weapons attack.

There have been few voices in support of Mr.

Cameron, although several against, including from

his own party.


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GDP falls to 4.4% for June QuarterIndias GDP growth for April-June quarter was

4.4 percent whereas Indias fiscal deficit during thesame period was Rs. 3.41 trillion, or 62.8 percent ofthe full-year target.

Manufacturing too fell an annual 1.2 percentduring the quarter while mining fell by 2.8 percent,however, the Farm output rose 2.7 percent.

Compared to the same period last year, the Q1figure for agriculture, forestry and fishing have come

down to 2.7 percent from 2.9 percent, mining andquarrying has come down to -2.8 percent from 0.4percent; electricity, gas and water supply has comedown to 3.7 percent from 6.2 percent. The Q1 figurefor construction has come down to 2.8 percent from7.0 percent; trade, hotels, transport & communicationfell to 3.9 percent from 6.1 percent; financing,insurance, real estate and business services also tookhit from 8.9 percent to 9.3 percent.

Economic growth virtually halved in two yearsto 5 percent in the fiscal year that ended in March

the lowest level in a decade and mosteconomists surveyed by Reuters in the past weekexpect 2013/14 to be worse.

The economy appears to be entering a tailspinas business confidence collapses under the weightof rapid rupee depreciation, rising energy costs,sharply tightening financial conditions and policyconfusion. The withdrawal of funds from emergingmarkets as investors re-adjust portfolios inanticipation of higher US interest rates has causedtremors from Brasilia to Jakarta.

But the weight of Indias current account andfiscal deficits has seen the rupee sink faster thanmost currencies.

Net tax receipts for the first four months of thecurrent fiscal year to March 2014 touched Rs. 1.45trillion, while total expenditure was Rs. 5.21 trillion.The countrys fiscal deficit during the 2012/13 fiscalyear ending March fell to 4.9 percent of the countrysgross domestic product, compared with 5.8 percenta year ago.

In the annual budget presented in February,Finance Minister P. Chidambaram had set the fiscaldeficit target at 4.8 percent of GDP for the currentfiscal year.

ECONOMY

SEBI tightens 'conflict of interest' rules formarket entities

To ensure fair and non- discriminatory treatment

to all investors and companies, SEBI asked stock

exchanges, rating agencies, brokers, depositories and

other market entities to put in place a strong system

to manage any conflict of interest.

The credit rating agencies have been specifically

asked to deploy adequate systems and policies to

ensure that they address any conflict of interest

during investment decisions of their own funds orby their top management and employees.

The rating agencies, their employees and key

executives have also been asked not to "take undue

advantage of any price sensitive information that

they may have about any company".

The key executives, such as CEOs and Managing

Directors, would need to take prior approval from

the Compliance Officer for sale or purchase ofsecurities of the companies with which the credit

rating agency may have rating-related dealings.All such entities and associated persons would

need to maintain "high standards of integrity" in

conduct of their business. They have also been asked

not to use any information received from the clients,under the normal business dealings, for any personal

interest and to put in place "information barriers" to

block flow of confidential information from one

department to another.

While separate 'conflict of interest' guidelines arealready in place for different classes of entities, SEBI

decided to put in place comprehensive general

guidelines for all intermediaries as per the Principles

set by the International Organisation of Securities

Commissions (IOSCO), a grouping of securities

regulators from across the world.

Credit rating agencies would need to ensure

compliance to the new guidelines by October 1, the

others have been asked to review their existing

polices and comply within six months.

Market intermediaries, stock exchanges, clearingcorporations and depositories have also been made

responsible for educating their 'associated persons'

for compliance of these guidelines.


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All these entities and associated persons would

need to lay down, with active involvement of senior

management, policies and internal procedures to

identify and avoid or to deal or manage actual or

potential conflict of interest.

They would also need to develop an internal

code of conduct governing operations and formulate

standards of appropriate conduct in the performance

of their activities, and ensure to communicate such

policies, procedures and code to all concerned.

Task Force on Currency Swap Arrangements

and Trade constituted

The government has decided to set up a task

force which will look at the possibility of having

currency swap agreements with key trading partners,

a move which would help in bridging current

account deficit. The 11-member task force would

include representatives from the the commerce

ministry, department of economic affairs

and financial services, RBI, SBI, CII, Ficci and

exporters body FIEO.

The Task Force will have the following Terms of

Reference:

1. To examine various types of Currency Swap

Agreements/Arrangements and their

implication for Indias trade and financialsystem;

2. To study the pros and cons of Currency Swap

Agreement/Arrangement for Indias trade;

3. To explore the possibility of Currency Swap

Arrangement/Agreement between India and

identified countries and make recommendations

accordingly.

The Task Force may submit its recommendations

to the Department of Commerce in four weeks.

Currency swap agreements invol ve exchange

of one curr ency for anot her currency. A dol l ar

sw ap arrangement w ould hel p Indi a support t he

rupee. Swap agreement s i n US dol l ar i s expected

t o prov i de confidence t o t he market and prevent

excess vo l a t i l i t y i n f i nanci a l and fo rei gn

exchange mark et s. Currency sw ap has emerged as

an import ant deri vat iv e t ool aft er t he global

fi nancial cri sis of 2008 to hedge t he exchange rat e

ri sks. I ndi a has signed currency sw ap agreements

w it h Japan (USD 15 bil l ion) and Bhutan (USD

100 mil li on). China has shown acti ve int erest i n

entering int o such an agreement w i t h I ndia, but i t

i s yet t o be signed.

Cabinet approves TUFS for XII Plan

The Cabinet Committee on Economic Affairs hasgiven its approval for implementation andcontinuation of Technology Upgradation FundScheme (TUFS) during the XII Plan period with amajor focus on powerlooms with a total outlay ofRs.11,900 crore.

The scheme is aimed at promoting indigenousmanufacturing of textile machinery. Interestreimbursement (IR) on second hand importedshuttleless looms shall be reduced from 5 per centto 2 per cent. On the other hand, for new shuttlelesslooms, capital subsidy would be raised from 10 percent to 15 percent, IR from 5 per cent to 6 per cent,and margin money subsidy from 20 per cent to 30per cent with an increase in subsidy cap from Rs. 1crore to Rs. 1.5 crore.

The capital subsidy for handloom and silk sectorswould be increased from 25 per cent to 30 per cent.In addition to this, margin money subsidy cap would

be increased from Rs.45 lakh to Rs. 75 lakh in respectof MSME and jute sectors. Sectoral cap of 26 percent will be applicable only for the spinning segmentand sectoral caps for all other segments have beenremoved to enable balanced growth across the valuechain.


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[ 1 0 ] Week l y Cu r r en t A f f a i r s 26thAugu s t to 01stSeptember , 2013

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INDIA AND THE WORLD

India announces aid for BhutanIndia has announced an aid of Rs 5,000 crore,

including a special package of Rs 500 crore, forBhutan as part of commitment to its continued socio-economic development, a move that assumessignificance against the backdrop of unease in the

bilateral ties recently.

The two sides agreed upon India's AssistancePackage for Bhutan's 11th Five-Year Plan for theperiod 1st July, 2013 to 30thJune, 2018. India has been

supporting the five-year plans of Bhutan for sometime. New Delhi had pledged Rs 3,400 crore for thecountrys 10th Five-Year Plan in 2008.

India also reiterated its commitment to installadditional 10,000 MW of power generating capacityin Bhutan as the two sides expressed satisfaction atthe progress in three ongoing projects.

India-Bhutan ties suffered some unease in Julywhen the subsidies New Delhi provides on cookinggas and kerosene supplies to the neighbouringcountry were discontinued

US launches investigation against Indian tradepractices

A US Federal agency has launched aninvestigation into Indian trade policies whichallegedly discriminate against the American tradeand investment.

The investigation, "Trade, Investment andIndustrial Policies in India: Effects on the US

Economy", was requested jointly by the Senate

Committee on Finance and the House Committeeon Ways and Means.USITC will report on recentpolicies and measures in India that affect US exportsand investment and evaluate the effects of such

barriers on US firms and the economy. In itsexamination, the USITC will enumerate restrictivetrade and investment policies that India maintainsor has recently adopted, determine which sectors of

the US economy are most affected by these policies,and describe the competitiveness of Indian firms inthese sectors.

The USITC will provide several case studies ofUS firms or industries that have been particularlyaffected by India's restrictions.

As requested, by the Congress, the USITC willalso perform a quantitative analysis of the effects ofsuch measures.

The USITC will survey a sample of US firms tomeasure perceptions of India's policies and theimpact of those policies on firms' strategies towardIndia.

The survey results will complement thequantitative analysis of the effects of these policieson trade, investment, and the US economy.

The USITC will deliver the report to theCommittees by November 30, 2014.

BRICS agree on capital structure fordevelopment bank

The BRICS bloc of large emerging economies hasagreed to set up the bank with a total capital of $50

billion (shared equally among them) that aims toreduce their reliance on Western financialinstitutions.

The move would likely end disagreements over

the funding and management of the bank. The bankwould support the financing needs in emerging anddeveloping nations for roads, modern-day portfacilities, and reliable power and rail services.

Previously the BRICS aimed to inject an initial$50 billion into the bank, but there was disagreementover whether each state should contribute $10 billionor if contributions should vary by the size of theireconomies.Chinas economy is about 20 times thesize of South Africas and four times as big as

Russias or Indias. Other key issues, such asproposals within the group to offer a stake todeveloped nations, needed further discussion. Thegroup is considering offering a stake of 40-45% tonon-BRICS nations.

The five countries represent a fifth of global GDPbut have struggled to find common ground thatwould convert their economic weight into jointpolitical clout.

India wants joint working group with

Myanmar on border issueMyanmar troops have attempted to construct a

defence post and fencing along the border in


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Manipur where there is no demarcation of boundarybetween the two countries prompting India to takeup the issue. Following a request of Manipur ChiefMinister O Ibobi Singh, the Centre took up the issuewith Myanmar which halted all constructionactivities.

Myanamar's move was objected by local village

chiefs and district officials as they thought Manipurwould lose its territory if the neighbouring countrygoes ahead with the construction.

India has asked Myanmar to set up a Joint BorderWorking Group to address the issue of demarcationof the border between the two countries. After therecent incident, India has reiterated the need to setup the group.

The Social Security Agreement between Indiaand Canada Approved

The Union Cabinet of India has approved theSocial Security Agreement between India andCanada. The agreement will benefit 40 thousandPersons of Indian Origin in Quebec province. TheSocial Security totalization agreement between Indiaand Canada was signed on 6 November 2012. TheSocial Security Agreement between Canada andIndia is expected to enter into force in 2014, once

both nations have completed their legislativeprocedures.

The Social Security Agreement will enhance

cooperation on social security between the two

countries. The Agreement will provide following

benefits to Indian nationals working in Canada:

a) For short term contract up to two years, no social

contribution would need to be paid under the

law by the detached workers provided they

continue to make social security payment in

India.

b) The above benefits shall be available even when

the Indian company sends its employees to

Canada from a third country.

c) Indian workers shall be entitled to the export of

the social security benefit if they relocate to India

after the completion of their service in Canada.

d) The self-employed Indians in Canada would also

be entitled to export of social security benefit oftheir relocation to India.

e) The period of contribution in one contracting

state will be added to the period of contribution

in the second contracting state for determining

the eligibility of social security benefits.

India has similar agreements with countries

including Luxembourg, the Netherlands, Malaysia

and Belgium.


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SCIENCE & TECHNOLOGY

Defence satellite GSAT 7 launchedIndia's first exclusive defencesatellite GSAT-7

was successfully launched by European spaceconsortium Arianespace's Ariane 5 rocket fromKourou spaceport in French Guiana, giving a majorpush to the country's maritime security. GSAT-7 wasthe 17th ISRO spacecraft lofted by an Ariane-seriesvehicle, continuing a relationship that extends tothe 1981 mission with the Apple experimentalsatellite.

The satellite will allow Indian Navy to

communicate with its fleet across the Indian Oceanthrough a top-secret encrypted system. Navy shipswill be able to exchange data about the preciselocation of enemy ships and submarines. In theprocess, each ship in the fleet will have acomprehensive digital map of the position of friendlyforces and enemy forces. The frequency bands ofGSAT-7 will help space-based marinecommunications. It has coverage over Indialandmass as well as surrounding seas.Earlier,satellite communication in ships was through

Inmarsat, a major provider of global mobile satellitecommunications services.

With the launch of the 2.5 tonne satellite Indiahas joined a select club of countries including USA,Russian, France, Britain and China that havededicated military communication satellites.

New guidelines issued by GOI to protectsharks

Recent studies cite India as the world's second-largest shark catching nation. Indian fishermen target

and catch sharks primarily for their meat; however,they do export fins from sharks they catch.Additionally, fishermen on foreign vessels in or justoutside of Indian waters have been reported toengage in shark finning. Humane SocietyInternational/India first began dialogue with theministry to highlight the need for shark conservationmeasures through a joint initiative with one of India'slargest fishing communities, the Association of DeepSea Going Artisanal Fishermen. Leadingconservation groups CPR Environmental Education

Centre, Wildlife Protection Society of India,Federation of Indian Animal ProtectionOrganizations, World Society for Protection ofAnimals India and Researchers for Wildlife

Conservation India supported HSI's initiative andalso appealed to the Ministry to adopt a finsnaturally attached policy.

Thus to control the fishing, the ministry ofenvironment and forests has issued a 'fins naturallyattached' policy requiring fisheries to land sharks incoastal states with their fins intact. The policy is astrong tool in the fight to end shark finning, a cruelpractice that occurs when fishermen catch sharks,cut off their fins and throw the still-living animals backinto the water where they die slow and painful deaths.

The fins attached policy will ensure bettermonitoring of shark fishing in India, and end thecapture of endangered shark species in Indianwaters. This will also provide sharks with a fairchance of survival, which in turns helps to maintaina balanced marine ecosystem.

Sharks are apex predator s vit al t o a w el l -

functi oni ng mari ne ecosystem. Shark popul at i ons

cannot sust ai n current sl aught er r at es. Unl i ke

ot her fi sh species, sharks produce few pups, and

t hus, many species ar e enda ngered and/ or

t hreat ened due t o t he fi n t rade. Indi a i s one of t hel argest export ers of shark fi ns i n the w orl d. Tens

of mi l l i ons of sharks are ki l l ed every year to meet

t he demand f or shark fi n soup, an A si an del i cacy

and t he pri mary cause of t he decimat i on of shark

populat ions w orldw ide.

IIT-Ms satellite may predict earthquakes

An electric model, named IITMSAT, with a 15kg satellite was designed by Indian Institute of

Technology, Madras ( IIT-M) that will monitor the

radiation belts on the earths surface and help inpredicting earthquakes. This is the largest ever modeldeveloped in the history of the IITs and is almost ready.

20 undergraduate students and a few postgraduate students laboured after their class hoursand additionally during weekends to make thisdream a reality. The IITMSAT nearly took 4 yearsfor completion.

The data collected by the satellite over itsmission life of one year will be given to scientists

who will be able to verify any correlation with datagathered from seismic and weather monitoringstations, Akshay added.Equipped withsophisticated devices, the model of the project is


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supposed to ready by the end of the year. To get thetechnicalities right, the project team has collaboratedwith ISRO (Bangalore), TIFR (Mumbai) and IGCAR(Kalpakkam).

ISRO constituted action plan for restoration ofGSLV-D5 Mission

The launch of GSLV-D5 (with Indian CryogenicStage), scheduled on August 19, 2013, had to becalled off due to a leak observed in the UH25 Fuelsystem of the Liquid Second Stage, during the lastlap of the countdown. At the time of calling off theCountdown, the GSLV Vehicle was loaded with 210tons of liquid and cryogenic propellants. About 750kg of UH25 Fuel had leaked out, leading tocontamination of the area around the launch pad. Ittook 6 days of round-the-clock operations before thecontamination could be reduced to the safe level toenable movement of the GSLV-D5 back to the

Vehicle Assembly Building.ISRO has constituted a High Level Task Team

chaired by Shri K. Narayana, (former Director ofSatish Dhawan Space Centre) to identify the causeof the leak and to work out an action plan for quickrestoration of the Mission, taking into account thesafety, reliability and life of the Liquid Second Stageand the four Liquid Strap-on stages, which werewetted with liquid propellants. The leak is suspectedto be in the lower portion of the propellant tank orthe fluid lines between the tank and fuel filling

system of the Second stage. Detailed investigationof the leak is underway.

The fol low ing act i on plan is put i n place:

A new Liquid Second Stage (GS-2) is beingassembled to replace the leaked-stage. All the fourLiquid Strap-on Stages are being replaced with newones. The First Stage (Solid) and core base shroudare being inspected and the elements that areaffected will be replaced. The Satellite Assembly,Avionics Equipment Bay and the Cryogenic Stagewill be preserved, following prescribed practices.

Based on current availability of hardware andcomponents, the GSLV Vehicle assembly andcheckout is expected to be completed at theVehicle Assembly Building by the first week ofDecember 2013 and the launch could take place byDecember 2013.

NASA detects water on moon surface

Based on valuable data collected by India'sChandrayan mission, a NASA-funded lunar researchhas yielded evidence of water locked in mineralgrains on the surface of the moon from anunknown source deep beneath the surface.Scientists using data from the Moon Mineralogy

Mapper (M3) instrument aboard the Indian SpaceResearch Organisation's Chandrayaan-1 spacecraft,remotely detected magmatic water, or water thatoriginates from deep within the moon's interior, onthe surface of the moon.

Earlier studies had shown the existence ofmagmatic water in lunar samples returned during

the Apollo programme.M3 imaged the lunar impact crater Bullialdus,which lies near the lunar equator.

Scientists have found that the central portionof this crater contains a significant amount ofhydroxyl - a molecule consisting of one oxygen atomand one hydrogen atom -- which is evidence thatthe rocks in this crater contain water that originated

beneath the lunar surface.

The detection of internal water from orbitmeans scientists can begin to test some of the

findings from sample studies in a broadercontext, including in regions that are far fromwhere the Apollo sites are clustered on the nearside of the moon.For many years, researchers

believed that the rocks from the moon werebone-dry and any water detected in the Apollosamples had to be contamination from Earth.

This internal magmatic water also provides cluesabout the moon's volcanic processes and internalcomposition, which helps us address questions abouthow the moon formed, and how magmatic processes

changed as it cooled.

China to launch 3rd lunar mission this year

China has begun the countdown for its thirdlunar mission scheduled for the end of the year,during which it plans to land an orbiter on themoon's surface.Chang'e-3 has officially entered itslaunch implementation stage following its researchand construction period.The mission will see anorbiter "soft-land"-a technique of landing by slowingspeed-on a celestial body for the first time.Earlier,

China had planned to land a rover on the moon inits third mission in 2013 and to retrieve it in 2017after surveying the lunar surface.

China launched the Chang'e-1orbiter in 2007and Chang'e-2 in 2010.

The first probe retrieved a great deal of scientificdata and a complete map of the moon, while thesecond created a full high-resolution map of themoon and a high-definition image of Sinus Iridium,a lunar landmark.Change-2 is still travelling in

space and flew to a distance of about 50 million kmfrom Earth, marking a new height in Beijing's deepspace exploration efforts.


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2 - MARKERS

Encyclopedia of Hinduism unveiled in USThe 'Encyclopedia of Hinduism' was unveiled

in Columbia, USA by the India Heritage ResearchFoundation.

The comprehensive encyclopedia has 11-volumework and it covers Hindu spiritual beliefs, practicesand philosophy, and is the culmination of a 25-yearacademic effort.

The encyclopedia is written in English andincludes about 7,000 articles on Hinduism and its

practices. The work also deals with Indian history,languages, art, music, dance, architecture, medicine,and women's issues. It contains more than 1,000illustrations and photographs. The encyclopedia'svolumes run from 600 to more than 700 pages. Some3,000 copies are being printed in first edition.

Germany's 'Whistleblower Prize'

Former NSA contractor Edward Snowden, whoexposed the most extensive US global surveillanceoperations, has been awarded this year's German

'Whistleblower Prize' worth USD 3,900 in absentia.Snowden, who faces espionage charges in the

US, has fled his home in Hawaii to Hong Kong inMay and subsequently to Moscow, where he has

been staying since 22nd June. He was granted atemporary asylum by the Russian authorities at the

beginning of August.

The whistleblower prize was instituted in 1999by the Association of German Scientists and theGerman chapter of the International Association of

Lawyers Against Nuclear Arms (IALANA).

Mahathir Award

The inaugural Mahathir Award for Global Peacehas been awarded to former South African PresidentNelson Mandela.

The Mahathir Award for Global Peace is anpeace award instituted by the Mahathir Global PeaceFoundation, which was formed to contribute toworldwide peace efforts. Mahathir Mohamad wasMalaysia's Prime Minister for 22 years before hestepped down.

The Mahathir Award for Global Peace will bepresented annually to recognise those who havemade valiant efforts in promoting peace.

Tata Medical Centre plans bio-bank

Along with raising corporate donations forproviding subsidised treatments to cancer patientsTata Medical Centre here is planning to come upwith a bio-bank that will store tissues of cancerpatients for furthering research in the discipline.

The bio-bank will store cancer tissues for furtherresearch with the consent of the patients of course.

Punjab to launch bed and breakfast scheme

To give a boost to tourism and provide home-

like, affordable accommodation to visitors, thePunjab Government will start a high-end bed and

breakfast scheme.

The initiative is to provide clean and comfortableplaces for overseas and domestic tourists along withan opportunity for them to stay with an Indian,particularly a Punjabi family.

Joint Air Exercise Shaheen (Eagle)-2

The Chinese and Pakistani air forces will hold ajoint exercise during September 2-22 in China'sXinjiang Uygur Autonomous Region borderingPakistan-occupied Kashmir.

The exercise, code-named Shaheen (Eagle)-2, isanother cooperative project between the two air forcesafter the Shaheen-1 drill in Pakistan in March 2011.


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EDITORIALS

Telangana: More turbulence to comeTelangana w i l l be an upstream St at e, creat i ng

condit i ons for w ater dispute wi t h Seemandhra.

The Congress-led UPA Government is on adetermined course to carve out the new State ofTelangana. But the Congress Working Committeeresolution left several issues ambiguous, whichwould become contentious when it comes to the

brass tacks of bifurcation.

Three critical issues stand out: Hyderabad,

employment and water resources. Hyderabad is aknown Gordian knot. Employment is already on itscourse to become a source of rancour and friction

between the two new States.

The Telangana Rashtriya Samithi (TRS) chief K.Chandrasekhar Rao has recently asked theSeemandhra-born government staff to leaveTelangana. The third, water resources sharing, ismuch more serious than what it appears to be.

The former two are in the nature of one-time

settlement issues, but water sharing can be arecurring source of tension between the states.

SEEDS OF DISCORD

The creation of Telangana State may be the signof a new wave of federal politics in India. However,political parties and leaders need to step away fromtheir immediate political interests and mull overthese new politics with sagacity and statesmanship.

But unfortunately, political opportunism seems tobe the defining character of creating the two new

states.If the reports of including the Rayalaseema

districts of Kurnool and Anantapur in Telanganaare true, this is deeply shortsighted. The move isapparently for achieving two political objectives: tocheck the influence of the TRS in Telangana Stateand dent the alleged strength of the YSR Congressin the new Andhra Pradesh.

Though the calculations look good on paper, theycan be seriously fallacious and misleading. First, ifthe sentiment has transcended party lines and caste

calculations in Telangana, the same sentiment for aunited Andhra can seal the fate of the Congress inAndhra Pradesh.

Even if Congress manages to keep its flocktogether, the sentiment may just swing in favour ofthe YSR Congress party, which maintainedsomewhat consistent stand for a united AndhraPradeshState.

Second, Rayalaseema districts in Telangana Statewill ensure continued dominance of identity politicsin the Telangana political scene. The divisive andantagonistic political rhetoric during the past decadelong Telangana agitation has widened the fault lines

between the regions.

This time, the backward Rayalaseema districtswill most likely complain discrimination byTelangana dominated administration. Or at least,that will be a promising route for Rayalaseemaleaders.

UPSTREAM STATE

There are other substantive reasons as well for

avoiding such political calculations. Inclusion of

Kurnool and Anantapur districts will turn TelanganaState into fully an upstream State with respect to

the Andhra State. All major rivers, Godavari, Krishnaand Tungabhadra, will then be flowing into Andhra

Pradesh from Telangana State.

Irrespective of how well we define equitable

allocation, politicisation of water disputes will

provide a new and fertile ground for antagonistic

politics to thrive.

The trans-boundary politics of the two states will

be similar to that we witness in the Cauvery dispute

between Karnataka and Tamil Nadu, where water

disputes are a way of pursuing politics.

Andhra Pradesh enjoys advanced irrigation

development and seeks to protect their rights of prior

appropriation, just as in Tamil Nadu.

Telangana and Andhra Pradesh will have similar

histories of unevenness and inequities as Karnataka

and Tamil Nadu. This asymmetry, combined with

histories of prejudice and antagonistic politics, may

lead to frequent recurrence of water disputes.

It is unfortunate that these issues do not receive

adequate attention.

Even during the first States ReorganisationCommission, there were demands for a separate


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Telangana State. But the commission favouredkeeping it united Andhra Pradesh for bettermanagement of water resources in the Godavari andthe Krishna basins.

WATER DI SPUTES

Redistribution of water resources and ensuringamicable political relations between the two states

has to be central to the bifurcation process.The state of affairs with respect to inter-state

water disputes resolution does not help much. Itrelies excessively on legal means, which did not helpmuch in disputes like Cauvery. Litigation in courtsor tribunals will only encourage a hide-and-seek

behaviour by states and politicisation of disputes.

Managing the inter-state relations for smoothtransition and coordinating contentious matters suchas river water sharing will be crucial.

Telangana and Andhra Pradesh politics will becharacterised by antagonistic rhetoric against eachother, at least for some time.

Political opportunism of the Centre will onlyaggravate these politics further, leading to tenuousinter-state relations. It is time to think innovativelyabout the right kind of institutions for coordinatinginterstate relations and managing tensions betweenthe two states, at least in the medium term.

There is little hope of constructive politics from

either side. Political leaders are driven by insecuritiesand short term political gains.

A major crisis of our times is the dearth of leaderswith courage and fortitude to take positions in thelarger interests. Let us hope institutions will rise tothe challenge.

Source: Business Line

In Europe, Austerity Works

Although many European governments haveannounced expenditure cuts and tax hikes,

their debt-to-GDP ratios continue to deteriorate. So,if the purpose of austerity was to reduce debt levels,its critics are right: fiscal belt-tightening has failed.But the goal of austerity was not just to stabilisedebt ratios.In fact, austerity has worked asadvertised in some cases. Germany's fiscal deficittemporarily increased by about 2.5 percentage pointsof GDP during the global recession of 2009;subsequent rapid deficit reduction had no significantnegative impact on growth. So it is possible to reducedeficits and keep the debt-to-GDP ratio in check -provided that the economy does not start out withlarge imbalances, and that the financial system isworking properly. Obviously, the countries on

the euro zone's periphery do not meet theseconditions.Countries whose governments eitherhave lost access to normal market financing (likeGreece, Ireland and Portugal) or face very high riskpremia (like Italy and Spain in 2011-2012) simply donot have a choice: they must reduce theirexpenditures or get financing from some official

body like the International Monetary Fund (IMF) orthe European Stability Mechanism. But foreignofficial financing will always be subject to lenders'conditions - and lenders see no reason to financeongoing spending at levels that previously led acountry into trouble.So, in the euro zone periphery,austerity is not a question of fine-tuning demand,

but of ensuring governments' solvency. Economistslike to point out that solvency has little to do withthe ratio of public debt to today's GDP, and muchto do with debt relative to expected future tax

revenues. A government's solvency, thus, dependsmuch more on long-term growth prospects than onthe current debt-to-GDP ratio.A reduction in thedeficit today might lead in the short run to a fall inGDP that is larger than the cut in the deficit (if theso-called multiplier is larger than one), which wouldcause the debt-to-GDP ratio to rise. But almost alleconomic models imply that a cut in expenditurestoday should lead to higher GDP in the long run,

because it allows for lower taxes (and thus reduceseconomic distortions).

Austerity should, thus, always be beneficial forsolvency in the long run, even if the debt-to-GDPratio deteriorates in the short run. For this reason,the current increase in debt-to-GDP ratios insouthern Europeshould not be interpreted as proofthat austerity does not work.

Moreover, austerity has been accompanied bystructural reforms, which should increase countries'long-term growth potential, while pension reformsare set to reduce considerably the fiscal cost of ageing

populations. Such reforms promise to strengthen thesolvency of all governments that adopt them,including those on the euro zone's periphery.

More important, austerity has been verysuccessful in restoring external balance to theperiphery. The current accounts of all southern eurozone countries are improving rapidly and, with thepossible exception of Greece, will soon swing intosurplus. This fundamental change has contributedto the reduction in risk premia over the last year,despite the political upheaval that continues in many

countries (particularly Italy, Portugal and Greece).

The external aspect is crucial. If public debt isowed to domestic investors, it can be serviced with


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the taxes levied on GDP. But debt owed to foreignerscan be serviced only with goods and services soldabroad - that is, exports. Thus, the key variable forcountries that had large current account deficits, andthus are burdened today with high foreign debtlevels, is not the debt-to-GDP ratio, but the foreigndebt-to-exports ratio (together with the growth

prospects for exports).Here, developments are encouraging. During the

boom years, when countries like Greece, Portugaland Spain were running ever-larger external deficits,

their exports did not grow quickly, so their foreigndebt-to-exports ratios deteriorated steadily, reachinglevels that are usually regarded as a warning signal.For example, for Spain and Portugal, the sum ofpast deficits relative to annual exports reached 300per cent and 400 per cent, respectively, in 2009,whereas a 250 per cent ratio is typically regarded as

the threshold at which external-financing problemscan arise.

With austerity, imports have crashed everywherein the periphery, while exports - helped by fallinglabour costs - are increasing (except in Greece). As

a result, these countries' current accounts are nowmoving into surplus, and their external solvency isimproving rapidly.

Indeed, according to the IMF, Spain shouldrecord growing current account surpluses over the

next five years, as exports rise strongly, thus cuttingthe external debt-to-export ratio by half (to about150 per cent in 2018), while Portugal's ratio shouldfall to about 250 per cent. Even Italy, whose externaldeficits have remained small, will soon record a

current account surplus.

Austerity always involves huge social costs; butit is unavoidable when a country has lived beyond

its means and lost its foreign creditors' confidence.The external fundamentals of the euro zone's

periphery are now improving rapidly. In this sense,austerity has done exactly what it was intended to do.

Source: Business Standard

This perverse rage against the poor

With the economic boom petering out, those whobenefitted from it are angry with the governmentfor the Food Security Bill because it is payingattention to the needs of the underprivileged for achange.

This weeks received wisdom insists that theIndian economy has irretrievably collapsed becauseon Monday, the Lok Sabha passed the National FoodSecurity Bill (NFSB). The Hindu Business

Line headline (Aug.28, page 1) said it all: Re, Sensexsink on fears Food Bill will feed deficit. The subtextof the lament appears to be that the rupee declinewas the markets way of registering a pointeddisapproval of the food security initiative. TheSchadenfreude-wallahsare as happy as are themarket-reformers that the United Progressive

Alliance (UPA) leadership has been fixed sogloriously for venturing into a populist course ofaction. The bandwagon routine has acquired amomentum of its own; even Hindi and othervernacular newspapers have allowed themselves to

be mesmerised by the crisis-mongering on television.This, though, is no time to panic. This is the time tostrike a balance between short-term difficulty andlong-term promises and commitments.

What w rong signals?

Once every few decades comes a moment in aRepublics life when a few fundamentalcommitments have to be renewed or rejected.This is one such week, a time to test our core beliefs.It is also the time to ask a fundamental question:since when in this country has a veto been ceded tothe markets and its manipulators, at home andabroad, to decide the issues of equity, social justiceand economic fairness? There is somethinginherently perverse in the suggestion that this much-needed welfare measure would send out the

wrong signals. Pray to whom? Those half-a-dozenprofessional financial manipulators in London?

Indeed, economists can always be relied uponto argue that there is always a better way to doanything. Some are competing among themselvesto declare that this food security initiative willneither work, nor fetch any votes for the ruling party.Let us make no mistake. Beyond all thesesophisticated arguments is a certain class prejudice,resentful that so many resources are being wastedfor the poor and other socially disadvantaged people,

that in this age of reforms, political considerationsand calculations are being allowed to determine theallocation of societal resources.

This misses the very essence of the concept ofpolitical legitimacy in a democratic arrangement. Ademocracy survives and prospers only when everystakeholder gets an abiding sense of participation,partnership and entitlement. We often seem to keepforgetting that politics is all about who gets what atwhose expense. During these last five years, at leastfor most of the time, the corporates and their policypreferences have been accorded unprecedentedacceptance. The time is ripe to strike a new balance.And the NFSB does just that.


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Reform by Steal t h

If we are honest with ourselves, we will have nodifficulty in acknowledging that for 20 years,economic reforms have been operationalised withouta political mandate. Not until recently when theCongress party held a public meeting to rally opinion

behind the Manmohan Singh governments FDI

policy, did any political party have the courage toproclaim openly and boldly its commitment toeconomic reforms. Yet, the reforms have beenroutinely and regularly proclaimed to beirreversible, irrespective of the political colour ofthe government in New Delhi. The process has well

been summed up in that evocative phrase, reformby stealth.

So now, when we are confronted with a veritableeconomic meltdown, we are ill-equipped to attendto the more serious and more debilitating crisis ofour democratic project running out of its popularlegitimacy. Indias democratic arrangements nolonger appear to have the requisite social andpolitical sanctions behind them. And we are unableto deal adequately with the systemic overload

because our public discourse has been hijacked by aself-serving advocacy crowd and by a professionallydisoriented media. For example, a year ago therewas carping all around that the crony capitalists andthe corrupt politicians were robbing the nation of

its wealth, and we staged massive spectacles ofresentment at Jantar Mantar; now, a year later, weare ranting and raving that we are not listening toor heeding those who rig the stock markets.

If shouting and screaming every evening couldproduce solutions to difficult and complex problems,India would have been the most efficacious andworking corner of planet Earth. Despite the obviousdisapproval of the shouting class, the UPAleadership has gone ahead with the Food SecurityBill. Hence, the exaggerated anger.

As social philosopher Roberto Mangabeira Ungerpoints out, a peaceful social order is in itself notenough; [S]ociety must be set up in a mannercapable of justification in the yes of each of itsmembers. In political economy terms, each sectionof society, and every stakeholder gets to determine:what is in it for me? The Democratic Project is asocial compact, an indefinable construct, butnonetheless one that hinges on a promise of a fairdeal for all. The poor are asking this question withgreater urgency and in the Maoist-strongholdswith arms and blood as decades of economicgrowth have produced new inequities anddisparities.

Rather than wait for the next round of theMaoist violence to jerk us back to harsh realities,what the Food law does is that at one stroke, itsends out a message that the Indian state has notturned its back on the poor, and that the have-notscontinue to have a claim on the collective resources,and that they have not been left to their own devices

or to the markets curative potency.This message has to be understood and

appreciated in the context of the growing preferencein some quarters for authoritarian solutions throwout the encumbering paraphernalia of social equityor fairness, and let the floodgates of enterprise and

business acumen be thrown wide open.

Resenting Interventionism

A decade of economic prosperity has allowedmillions and millions of middle-class families to

realise their upwardly revised aspirations and lifeexperiences; at the same time, the UPA saw to itthat the welfare state kept expanding the socialagenda, providing a safety net against the vagariesof the market.

Now, the good days have seemingly come to anend, and there is anger that the state remains equallymindful of the welfare poor. We all thought that thepoor have been disappeared from the policy drawingroom; and suddenly, they are back with almost a

veto. The narrative-controllers resent that. Just whenthey thought they had successfully defanged theIndian state of its interventionist impulses, herecomes the Food Security Bill.

The bill can be seen as the other side of thestimulus coin. The 2008-2009 stimulus was used

by the super-rich to buy real estate in London andother European cities. At that time, no one seemedto find anything inherently wrong at this massive,disproportionate allocation of resources for so few.None of it was invested here to create jobs; instead,

the super-rich petulantly proclaimed that thegovernment was not sufficiently attentive to theirsentiment and hence they would take their ball(Indian savings and taxpayers) and play in othereconomies. No one complained; instead, thegovernment was blamed for the corporate sectorsmisplaced priorities.

If subsidised food can reduce the food spendingof the poor, and place some surplus money in theirhands, which would then be spent in India, thatmay end up stimulating domestic consumer demand.

It would be a kind of stimulus lite, for the poor.

A ruling party in India is called upon to fulfil itsbasic obligation to keep intact the democratic


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credentials of the system. The food securitylegislation is a partial response to that obligationand must be applauded.

Source: The Hindu

Companies Bill, 2012: Will auditors become avanishing breed?

Soon after the Rajya Sabha passed the newCompanies Bill, corporate affairs minister SachinPilot hogged the limelight by asserting that the basicintent of the new law was lesser regulation, morecompliance and to ignite the entrepreneurial spirit

by offering "freedom" to entrepreneurs.

What's ironical is that the government hasconveniently forgotten the role of auditors, evenwhen it tom-toms that the new Bill seeks to ensure

better enforcement of accounting laws in thecorporate world.

Aglance at various provisions of the newlegislation makes it clear that the days of the auditingfirms are numbered and soon the auditors will bean extinct breed.

Clause 140 confers the right to the proposedNational Company Law Tribunal to order a changeof auditors in case it finds the auditors have actedfraudulently or abetted or colluded in any fraud bythe company or in relation to the company.

Additionally, the clause specifies the responsible

audit firm will be banned from fresh appointmentas auditors for any company for a period of fiveyears from the date of order given by the tribunal.

Clause 245 introduces the concept of class actionthat gives the right to members and depositors of acompany to claim damages or compensation fromthe company, its directors, auditors and experts.

Such damages can be claimed from auditors forany improper or misleading statement of particularsmade in the report or for any fraudulent, unlawful

or wrongful act or conduct. The unlimited liabilityunder class action will be on the firm and thepartners involved.

If we take a cue from the multimillion-dollarclass-action settlements across the globe, thecollateral costs and compensation could be soexorbitant that it could easily make the audit firmand its partners bankrupt. If this provision isimplemented, a majority of audit firms will have toshutter down their practice. This will, in turn, hugelypolarise auditing in favour of large firms that havethe money power to shoulder such a burden.

But considering the limit on the number of auditsper partner, the question remains: who will do the

balance auditing? Further, this clause runs counterto the concept of limited liability partnership as ittends to create unlimited liability. There are variousmonetary penalties ranging, from Rs 25,000 to Rs25,00,000, which have been introduced in the Billfor noncompliances related to filing, reporting,fulfilment of powers and duties, etc, by the auditors.

Further, the Bill lays down provision forimprisonment, if an auditor is found to be guilty offraud, which ranges from six months to 10 years.

Referring to the current low-fee structure, theaverage fee per listed company is lower than Rs10,00,000 now. If private companies are counted forthe same, the average fee per company is even lowerat around Rs 5,00,000.

Considering the onerous liabilities cast onauditors vis-a-vis their fees, the audit firms will beprevented from taking up the audits. The Bill alsostipulates the constitution of the National FinancialReporting Authority (NFRA) that will oversee thequality of service of professionals associated withcompliance of accounting and auditing standards.

Currently, the audit firms are subject to peerreview by the Institute of Chartered Accountants ofIndia (ICAI), review of audited financial statements

by the Financia l Report ing Review Board(established by ICAI) and review of audit firmsunder the aegis of Quality Review Board (established

by government of India under CharteredAccountants Act, 1949).

The constitution of NFRA will create anadditional review burden on the firms. Again, theoverdose of regulation will only deter firms fromtaking up auditing. The law that claims to usher inquality seems to be putting a high price on it. Moreimportantly, any hope of enforcement of newprovisions by the government will be illusory.

In the early 1980s, total composition of CAs was80% in practice and 20% employed. However, over

the last decade, 90% of CAs are employed andjust 10% are in practice. The provisions of thenew Bill will further dissuade CAs from joiningthe practice and push them to scout for risk-free

jobs. Now, the moot query is: who will audit thecompanies? The CAG?

Source: Economic Times

Fears of Asian crisis overblown

The "taper terror" returned to haunt Asian

markets last week, spurring investors to dumpregional shares and currencies on growing dreadthat the United States central bank may reduce itsgigantic stimulus programme next month.


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They fear that a pullback of US quantitative

easing (QE) will mean less liquidity going into Asian

assets while also raising US interest rates and the

greenback - an outcome that will make Asia less

attractive as an investment destination.

But a few observers are entertaining an even

scarier vision: the spectre of a repeat of the Asian

financial crisis.They see eerie echoes of the 1990s.Across Asia, economies have been borrowing heavily

to fuel spending, sparking a run-up in asset prices,

inflation and credit intensity - the amount of debt

needed to generate each unit of economic expansion.

And just as it did in 1997, the party may now be

coming to an abrupt end.Growth in Asia's trade-

dependent economies has slowed and once-surging

capital inflows are reversing direction, depressing

currency values in the region and making it difficult

for nations to balance their external accounts.Interest rates, which were slashed to near zero

in developed countries to spur growth, are also rising

again, which means firms and households rolling

over their debt will do so at higher cost.

Some economists portend the tapering of QE will

be the tr igger that exposes deeper economic

weaknesses, by removing cheap foreign funding

from Asia just when it is most reliant on it.This

could mean the region is headed for more serious

and lasting trouble than a one-off panic in themarkets, they warn.

Quak i ng over QE

Investors have made it clear which Asian

economies they are most concerned about.India's

rupee has fallen almost 20 per cent against the

greenback this year and hit new all-time lows,

although it regained some ground late last week.

Indonesia's rupiah has lost about 12 per cent,

while the Malaysian ringgit is down about 8 percent and the Thai baht has shed 5 per cent. All

reached their lowest levels against the US dollar

since 2009 or 2010 last week.

These four countries are in the line of fire as a

slowdown in China and lower commodity prices

weigh on their exports. This has led to deteriorating

current account positions and weaker growth.

India, Indonesia and Thailand have been running

record or near-record current account deficits, which

means they are not exporting enough to pay for

their imports and must borrow from other countries

or run down their reserves. Malaysia is still in

surplus, although not by much.

The economic outlook is also dimming. Sluggishexports have led Malaysia, Thailand and India tocut growth forecasts for this year, with Thailandslipping into recession in the second quarter.

Indonesia is also fighting rising inflation, whichled it to raise interest rates this month.Meanwhile,debt levels have been rising. Malaysia's households

already owe 177 per cent of their income, the highestin Asia, according to a Standard Chartered reportlast month. In Thailand, it is the speed of the rise indebt that is worrying: Its recent run-up in credit has

been one of the fastest in the region.The situationis tricky for policymakers. If they cut interest ratesto stimulate growth, they risk more capital outflowsas investors seek higher returns elsewhere, makingit even more difficult for them to address theircurrent account gaps.

Malaysia and Indonesia are especially vulnerable,

given their reliance on foreign investors. More than30 per cent of their government bonds are held byforeigners, noted OCBC Bank economist SelenaLing.But if the authorities tighten monetary policyto stabilise currencies or reduce inflation, that riskssapping economic vitality.

The worry is that policymakers, stressed by therecent capital flight, will make a wrong step. Theyneed nuanced policies to shore up their currenciesand restore investor confidence without doing so at

the expense of growth."The speedier rise in US real rates and dollar has

now pushed Asia to lift its real rates at a time whenits GDP (gross domestic product) growth has already

been slowing," said Morgan Stanley economists lastweek."This pro-cyclical tightening is only increasingthe headwinds" to Asia's growth, they added.Still,most economists are not losing sleep over thesituation.

"Calling it a currency and economic crisis at thisjuncture is missing the point somewhat, even thoughrisks persist," said Ling. "Asian economies have beenon a steamroller boom for the last three years, andthe fact is that many Asian economies arefundamentally on a much firmer economic footingthis time round."Deutsche Bank economist TaimurBaig agrees that while the currencies of India,Indonesia and Malaysia are particularly stressed,they do not "appear to be in danger of falling intoan outright currency crisis"."Reserves cover, despiterecent declines, is still ample. Even when one adds

up the entire stock of short-term liabilities and theprojected current account needs for this year, allthree economies have reserves to finance themcomfortably," he said.


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It 's different t his time

The picture also looks brighter in most otherAsian economies, although none was spared the sell-off last week.

Those with current account surpluses, largeforeign currency reserves to counter exchange ratevolatility and solid banks and growth policies are

well-placed to weather the storm.Singapore, for one, has several factors in its

favour. Its trade account is constantly in the black,it has robust reserves and does not rely on debt tofund government spending, and it received relativelyfewer capital inflows from QE.

Singapore's Deputy Prime Minister TharmanShanmugaratnam said last Friday that QE taperingin itself is "not a bad thing" for Asian economies.

"It is not in anyone's interest, including the

emerging economies, for very low global interestrates to continue indefinitely," he said. "Low ornegative real interest rates have inevitably led to asearch for yield, and a build-up of financialimbalances in Asia."

Other Asian economies that have strong currentaccount positions, which means they export muchmore than they import - such as the Philippines,South Korea and Taiwan - are also unlikely to bedragged down.

Credit Suisse economist Christiaan Tuntononoted that South Korea and Taiwan are runningcomfortable current account surpluses of 5 per centand 11 per cent of GDP respectively.

The Philippines is also on a better economicfooting than other Asean neighbours due to itspersistent current account surplus and lower relianceon commodity exports, said Credit Suisse economistMichael Wan.As a whole, economists such as

Jimmy Koh, United Overseas Bank's head of researchand investor relations, are fairly sanguine about

history not repeating itself in Asia. "We believe that

though QE tapering will be a short-term destabilisingfactor in Asia, the economic fundamentals of theregion have strengthened due to the prudenteconomic policies implemented since the 1997 AsianFinancial Crisis," he said.

Foreign reserves and current account levels aregenerally strong, and most countries now have

flexible exchange rate policies, making a 1990s-stylecurrency crisis and contagion more unlikely. Asianpolicymakers are also more proactive aboutmanaging credit cycles, said Koh.

Companies and banks are also financiallyhealthier. While there will be some inevitable painas borrowing costs rise and asset markets adjust, adomestic banking crisis is less likely, added Ling.

Another upbeat sign often lost in the marketmuddle is that QE will be tapered only once theFederal Reserve is convinced that the US economicrecovery is self-sustaining. All signs so far - frommanufacturing to consumer spending - are pointingto a firmer rebound, not j

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