The collapse of the BSP-BJP coalition government in Uttar Pradesh, though sudden, was not unexpected. It remains to be seen what course the Governor will adopt. 



Mayawati again

Business Standard

The technology for a bomb blast is so basic, and the terror networks so entrenched, that it takes relatively little money and mobilisation to attack soft targets in public places and create a sense of

Terror's real target

When taking stock of the economy these days, it is both easy and tempting to focus on the positives. On the macro-economic front, the monsoons have been good, if not great. 



Rational exuberance

The Securities and Exchange Board of India&rsquo;s (Sebi&rsquo;s) decision to accept most of the recommendations of the Takeover Regulations Advisory Committee (TRAC), almost a year after the report was submitted, has come as a breath of fresh air on the policy-making front. Several of TRAC&rsquo;s recommendations amounted to a bold departure from the existing takeover regulations, with industry and merchant bankers lobbying strongly against some of them.

Sebi's pragmatism

Despite her charm and wit, Pakistan&rsquo;s Foreign Minister Hina Rabbani Khar clearly does not have a face that could have launched a thousand megawatts! Mistrust between India and Pakistan is alive and well, fleeting moments of bonhomie notwithstanding. Pakistan&rsquo;s recent decision to decline India&rsquo;s offer to supply electricity is unfortunate. Even more disturbing is the logic on which this decision was based.

Photo-op diplomacy

The United States of America has revealed all its weaknesses and vulnerability in the past month of political bargaining and brinkmanship on a national plan for government debt reduction. While the deal at the eleventh hour between the Republican and Democratic parties may have brought the markets around the world relief, sending even Indian stock market indices up and softening the prices of gold and other commodities, these immediate responses hide enduring concerns, both within the US and globally, about the resilience of the US economy, the sagacity of its political leadership and the quality of its economic management. The $2.4-trillion spending cuts, spread over a ten-year period, to which US President Barack Obama has agreed would deflate an already faltering recovery. In a classic pre-Keynesian act, President Obama has surrendered to the domestic Ayatollahs of supply-side economics, now reincarnated as Tea Party enthusiasts in the land of coffee drinkers.

The price of brinkmanship

Foreign direct investment (FDI) inflows into India fell by almost a third, from $36 billion in 2009 to $25 billion in 2010. In the process, India&rsquo;s global ranking as a destination for FDI fell from eight to 14, according to the World Investment Report, 2011. During the corresponding period, inflows into the United States, the world&rsquo;s top FDI recipient, increased from $153 billion to $225 billion, while the numbers for China were $95 billion and $105 billion, respectively. Several other countries like Belgium ($62 billion), Brazil ($48 billion) and Germany ($46 billion) attracted significantly more FDI than India did during the year. What accounts for the fall in FDI to India? There is no clear-cut answer. On the various predictors of FDI identified empirically, India fares well on market size (measured by GDP) and potential for market expansion (GDP growth rate).

More than just the green dollar

First, it was with the media. Now, it is with India Inc. Finance Minister Pranab Mukherjee&rsquo;s engagements in the last few weeks have had a common goal. With the media, Mr Mukherjee tried to explain how the government was not suffering from policy paralysis. As far as communication exercises go, the attempt met with little success. Outlining specific action already taken or unveiling plans to initiate new measures would have been more convincing than asserting that there was no policy stasis in the government. In his interaction with industry leaders on Monday, however, Mr Mukherjee handled himself better. He invited industry to suggest specific areas where the government needed to initiate policy action. What&rsquo;s more, he set a time frame &mdash; one for receiving suggestions and the other for finding a way to address those concerns.

Meetings only a start

Jairam Ramesh has moved quickly at his new perch, as the minister for rural development. His proposals with regard to a new law on land acquisition, aimed at giving the original owners of land a fair due, and paying additional compensation in cases of forcible acquisition through the provision of a solatium, are mostly along the right lines. In essence, he has moved away from the present situation in which the government can forcibly acquire land and hand it over to private interests &mdash; the issue that is at the heart of the protests in Noida, neighbouring Delhi. In doing so, the minister has defined more narrowly the principle of eminent domain &mdash; as this newspaper had recommended a while ago. Private industry keen on acquiring land will be required to buy it directly in the market, except in cases where there is a demonstrable public interest involved, in which case the government can step in. In short, the new draft Bill has moved in the right direction.

Mostly fits the bill

The progress of the south-west monsoon, which has run halfway through its four-month course, has been by and large satisfactory. However, uncertainties persist &mdash; mainly because, after a promising start in June that saw surplus rainfall, precipitation has been 14 per cent short of the normal in July. In addition, the met office has predicted that rainfall in the remaining months of August and September will be 10 per cent below the normal. The cumulative, area-weighted rainfall in June and July has been five per cent below the long-term average; for the monsoon as a whole, the shortfall could range between five per cent and 10 per cent. Technically, this would be deemed to be below normal.

So far so good

Among the many initiatives and innovations being considered to improve returns to farming, the creation of producers&rsquo; companies deserves closer policy attention than has been the case so far. A farmers&rsquo; company, registered as a corporate entity with the registrar of companies, under the Companies Act, can help farm producers come together and derive economies of scope and scale. A group of farmers in Andhra Pradesh has reportedly taken the initiative to do precisely this. It may be recalled that the Companies Act was amended in 2002 to facilitate the formation of such companies by farmers and small producers of handicrafts and other products. The potential benefits of such enterprises go beyond acquiring greater bargaining power while procuring inputs and selling produce in bulk. They allow farmers to venture into newer fields, seek the latest technology and know-how, and add value to their produce and thereby boost returns.

Company of farmers

The Supreme Court decision banning both mining and movement of ore in Bellary district in Karnataka, following the Lok Ayukta report, is excessive. The blanket ban penalises even those who did nothing wrong. While the outrage over the illegal profiteering of over Rs 12,000 crore by a politician-operator-bureaucrat combine is understandable, applying the brakes on all mining and related activity in the district is an undifferentiated response.

Too sweeping a ruling

India&rsquo;s decision to route payments for oil imports from Iran through Turkey&rsquo;s Halk Bankasi (Halkbank) ends seven months of an impasse between the two countries following the Reserve Bank of India&rsquo;s decision (under US pressure) to terminate the Asian Clearing Union as a conduit for payment. Under the latest agreement, Indian refineries which import directly from Iran will make rupee payments to the Union Bank of India, which will in turn route payments in euros to Iran through Halkbank. While this avoids the use of the dollar, it remains to be seen how sustainable this arrangement is, given the United States&rsquo; implacable opposition to any large-scale commercial dealings with Iran.

Tehran via Ankara

This newspaper wishes the chairperson of the United Progressive Alliance and president of the Indian National Congress Sonia Gandhi good health, long life and a speedy recovery from her illness and surgery. However, we reject the view of the spokesperson of the Congress Party that information pertaining to Ms Gandhi&rsquo;s health is a &ldquo;personal matter&rdquo; and that the people of India should &ldquo;respect&rdquo; her family&rsquo;s request for &ldquo;privacy&rdquo;.

Right to information

History was made last week when Standard &amp; Poor&rsquo;s (S&amp;P) downgraded the United States sovereign credit rating, reportedly for the first time since 1917, from triple A to double A plus. Even as the Barack Obama administration avoided the ignominy of a first-ever payment default last weekend, the uneasy and unconvincing compromise sent market sentiment down before the week was out.

West and the rest

The Indian corporate sector reported robust revenue and net profit growth in the previous quarter. The analysis by the Business Standard Research Bureau of available data from 900-odd companies that have announced their first-quarter (April to June 2011) results shows that their aggregate revenue grew by 27.09 per cent and net profit by 16.93 per cent over the same period last year.

A mixed quarter

With all the bad news coming from the United States in the past few days, one must not forget Europe. The news from the European Union (EU) is bad &ndash; could get worse &ndash; and at present even in theory Europe does not have some of the exit options that the US still has, like a government and a central bank that can bail the economy out. So watch out for news from Europe.

Watch out for Europe

Cognizant&rsquo;s race past information technology major Wipro marks an inflection point in the evolution of India&rsquo;s software industry. The entire industry may have been hit by global trends since 2008, but it is the way each company has responded to external challenges that has separated the front runners from the rest. Wipro has been affected by three factors. One, despite establishing itself as the world&rsquo;s largest design services house, it has not made a mark in serving the global financial services sector, the main customers of India&rsquo;s leading software companies. When the global economy, particularly the battered financial services industry, began to recover, software firms that were first to come to the latter&rsquo;s aid and help finance companies reduce costs were the quickest to recover. Two, Wipro cut costs drastically during the recession by reducing the sales and marketing staff.

Cognisant of Cognizant  

Just as correlation does not establish causation, asking questions does not amount to passing judgements. The Comptroller and Auditor General of India (CAG) is an important constitutional office that has a role to play in improving governance. However, going beyond one&rsquo;s brief can always harm an institution in the long run and be counterproductive. An auditor&rsquo;s dharma is to see if spending has been correctly accounted for and to check if there has been any avoidable and wasteful spending. However, auditors cannot arrogate to themselves the role of policy makers and managers. Every good manager knows concrete decisions are taken under concrete conditions. An auditor often seeks to know why ideal decisions were not taken under ideal conditions.

Auditing the auditors

It is a pity that Union Finance Minister Pranab Mukherjee has had to withdraw his statement in Parliament that the government would consider the suggestion to end the subsidy on diesel used in passenger cars. Three days after he had made the statement, he said no such plan was in the works, nor was there a proposal to change the present structure of duties in this regard. Meanwhile, his first pronouncement sent the stocks of auto companies down &mdash; the firms are already apprehensive about an impending economic slowdown in sales. Surprisingly, Mr Mukherjee, a veteran with innumerable years spent in important economic portfolios, is not given to shooting his mouth off. What prompted him to say something that he had to retract later is a matter of speculation. However, the episode provides an opportunity to restate certain well-known realities.

The FM's welcome slip

No modern corporation would take a decision on the appointment of its chief executive a few days before the announcement is due and be apologetic about it, saying that further delay was not possible given the exigencies of the situation. That is precisely what the Union government has done in giving Reserve Bank of India Governor Duvvuri Subbarao a two-year extension 22 days before his term expires. Union Finance Minister Pranab Mukherjee claimed that there was no reason why any decision was required to be taken at this point in time since &ldquo;there was time till September&rdquo;! True, when Dr Subbarao was appointed RBI governor in September 2008, his appointment was announced five days before the end of the five-year term of Dr Y V Reddy, the then RBI governor.

Eleventh-hour wisdom

Incisive columns and editorial comment by top opinion leaders

Page 492 - Editorial Comment