India&rsquo;s premier software services company, Infosys Limited, has reached out to its banker, the non-executive chairman of ICICI Bank, K V Kamath, to step into the shoes of its founder N R Narayana Murthy. This long-expected move should bring an embattled firm a &ldquo;desirable newness&rdquo; that Mr Kamath is capable of offering. The transition from the era of the founders has not been smooth for Infosys. Not only has the external environment become more competitive, but the internal environment has also become increasingly contentious. Managing these twin challenges and dealing with the firm&rsquo;s &ldquo;midlife crisis&rdquo; will be the main task before the new team. Mr Kamath comes with high credentials, though one must not exaggerate the leadership he was able to provide at ICICI Bank or his role in brokering peace between the Ambani brothers &mdash; the two things that keep coming up in the media as Mr Kamath&rsquo;s assets.

Desirable newness

Business Standard

The case for deregulation of the savings bank deposit rate by the Reserve Bank of India (RBI) is becoming stronger day by day. It is time India returned to a system favoured by most modern economies around the world. The giant steps taken in banking reform have not only significantly improved industry health but also the effectiveness of the regulator. So this last vestige of old-style regulation is more of a psychological prop which can be safely removed without fear of mishap. The chief concern of the regulator in contemplating the move is whether it will put greater pressure on weak banks and, thus, create avoidable trouble for the regulator and the banks&rsquo; significant owner, the government. Freeing the savings bank rate may heighten competition, forcing weaker banks to pay more than they can comfortably do.

Empower the savers

The killing of Osama bin Laden, the leader of the global terror network Al-Qaeda, marks a turning point in the so-called &ldquo;war on terror&rdquo;. However, it would be premature to imagine that what has come to be called &ldquo;jihadi terrorism&rdquo; would lose legitimacy as a political weapon in the eyes of radical Islamic elements.

The world after Osama

India has decided to join a global consensus to end the production and use of endosulfan after being allowed 11 years to phase it out and promised financial assistance. This decision is not irreversible since India has to ratify its own decision. An absolutely final position can be adopted after the results of more elaborate studies on extensive use are available since a causal link between the health hazards in Kerala and endosulfan is disputed. However, it is clear which way the world is going. The Europeans lead in rejecting it and not only have over 60 countries banned its use, the US has also decided to phase it out by 2016. The US Environmental Protection Agency has determined that it can pose unacceptable health risks to agricultural workers and wildlife.

An end to endosulfan?

Through its monetary policy statement and the consequent policy action, the Reserve Bank of India (RBI) has sought to redefine the parameters for macroeconomic policy this fiscal. Instead of trimming its sails and going with the flow, the central bank has charted a new course and expects the government to follow suit. The RBI is right to assert that high inflation is inimical to sustained growth and that current inflation and expectations pose a significant risk to future growth.

RBI walks the talk

The trade talks between the commerce secretaries of India and Pakistan have laid the foundation for expanded bilateral trade, and the legitimacy of existing unreported trade. The ringing endorsement for the talks in the media and trade circles of both countries clearly demonstrates the presence of constituencies in both countries that favour greater engagement in trade and commerce. This positive energy should not be allowed to dissipate as has happened so often in the past. The two biggest positives at the meeting were: Pakistan&rsquo;s decision to finally seek to move forward on extending the standard &ldquo;most-favoured nation&rdquo; (MFN) status to India (this remains an irritant if not a substantial trade barrier, and has been blocked by political prejudice in Pakistan rather than economic reason); and an agreement to delink progress in trade and commerce from &ldquo;pending bilateral&rdquo; issues (a euphemism for Kashmir).

The most-favoured notion

Given the poor standard of service and lack of professionalism, it is often difficult to sympathise with Air India employees when they go on strike.

Managing a merger

The new international consensus on sharing swine flu vaccine and virus samples is a major victory in the battle against the pandemic. It marks a turning point in international cooperation in the field of medicine and public health. The agreement, brokered by the World Health organisation (WHO), is to be formally adopted by 193 member countries at the forthcoming World Health Assembly later this month. It will allow countries in dire need of low cost medical solutions to public health challenges affordable access to essential vaccines, anti-viral drugs, diagnostic kits and even vaccine production technology during disease outbreaks. The protocol provides for binding regimes for sharing of virus samples and the vaccine prepared from them between developed and developing countries. It is significant that for the first time such an inter-governmental treaty has the support of multinational drug companies.

Preventing pandemics

The Union minister of state for environment and forests (not to forget, independent charge), Jairam Ramesh, made a curious remark while signing off on the Posco project in Orissa. While declaring correctly that &ldquo;faith and trust in what the state government says is an essential pillar of cooperative federalism&rdquo;, and gratuitously conceding that &ldquo;beyond a point, the bona fides of a democratically elected state government cannot always be questioned by the Centre&rdquo;, Mr Ramesh still proceeded to do precisely that. While not clarifying what that &ldquo;point&rdquo; is in a case such as this, and how the point on which the Centre can question a state government&rsquo;s &ldquo;bona fides&rdquo; is constitutionally defined, and, indeed, who defines what is bona fide and what is not, Mr Ramesh went ahead to enunciate a bizarre new principle of Centre-state relations.

Ministerial discomfort

The annual Global Information Technology Report plots the status of countries in terms of their ability to use information and communication technology (ICT) to drive their overall competitiveness and improve the well-being of their citizens. In the process, it captures the duality of India, which has the wherewithal to deliver global IT services but is poor when it comes to delivering the same to its own citizens.

Home truths about ICT 

There is no romance more enduring than an Indian&rsquo;s love for the mango, no passion more exciting than the joy of devouring a succulent mango. Nothing divides the people of the Indian sub-continent more than their contending loyalty for their favourite mango &mdash; alphonso, langra, himayat, benishaan, bangenapalli, safeda, rassaalu, and so on and so forth, literally dozens of varieties. Nothing unites the people of the Indian sub-continent more than their shared love for this &lsquo;king of fruit&rsquo;! Unlike so many fruit and vegetables of daily consumption in India that were imported into the sub-continent from distant shores, the Indian mango, Mangifera indica, has been native to the sub-continent for thousands of years. Little wonder that its shape is so ubiquitous in Indian art and architecture, jewelry and design, prose and poetry.

King of the quarter

The noisy, contentious and often childish public debate in India and Pakistan last week, after the United States caught Osama bin Laden, further proves how oblivious strategic analysts on both sides of the border are of the fundamental importance that economics has for a country&rsquo;s dynamics. However successfully Pakistani spokesmen may brazen it out, and however frustrated Indians may be over their inability to stop Pakistan from exporting terrorism, the hard fact is that Pakistan is losing ground, year after year, month after month.

Nuisance neighbour

India rarely gets the timing of foodgrain exports right. More often than not, it enters the international market when the best opportunity is lost and the grains need to be subsidised to get buyers. This seems to be happening again with the government dragging its feet on figuring out how to handle burgeoning wheat stocks. The Empowered Group of Ministers on food, which has to take the final call on the agriculture ministry&rsquo;s proposal for wheat exports put before it months ago, has failed to take a decision so far. Union Agriculture Minister Sharad Pawar has repeatedly argued, albeit in vain, that exports are the only way to make room for fresh wheat currently being procured from this year&rsquo;s bumper wheat harvest of over 84.3 million tonnes. Exports are also necessary to ensure wheat growers better returns so that they can deal with rising production costs.

Export or perish

A recent statement by Zhou Xiaochuan, governor of China&rsquo;s central bank, that China&rsquo;s foreign exchange reserves &ldquo;exceeded reasonable requirements&rdquo; has generated consternation in global financial circles. This opinion has been repeated with increasing candour in recent months in China&rsquo;s academic and policy circles, generally considered very close to the government, if not under its direct control. However, to date, the Chinese authorities have acted with restraint for fear of disrupting global financial markets. China&rsquo;s foreign exchange reserves crossed the $3 trillion mark in March 2011, driven by an annual trade surplus of $200 billion, which is considerable, even if lower than in previous years. Since the reserves are mostly dollar-denominated, it makes China vulnerable to a decline in the dollar&rsquo;s value.

An embarrassment of riches

The long search for an effective system to target subsidies on food, fertiliser and fuel has finally ended with the Planning Commission accepting the idea of an Aadhaar-based rechargeable smart card. Ideas like direct cash transfers and food stamps have been rejected in favour of the Aadhaar smart card. The new proposal can help target the food subsidy with the tamper-proof biometric cards &ndash; Aadhaar unique identity cards &ndash; being issued by the Unique Identification Authority of India (UIDAI). What sets it apart from most of the other Aadhaar-based methods mooted earlier is the inscription of households&rsquo; entitlement on the cards and, more significantly, the choice it offers to the intended beneficiary who can use it for buying any food item, be it cereal, milk, eggs, or fish, from either ration shops or other designated stores.

Look before you leap

The trans-Atlantic financial crisis of 2008 and the consequent slowdown of western economies, the sustained rise of China and India&rsquo;s more recent promise have made many assume that the 21st century will be an &ldquo;Asian century&rdquo;, with more than half of the world&rsquo;s GDP coming from Asia, much like a couple of centuries ago, before the Industrial Revolution and colonialism gave Europe and the West an edge over China, India and the rest of Asia. Not necessarily, says a useful reality check from the Asian Development Bank (ADB). The report titled &ldquo;Asia 2050: Realising the Asian Century&rdquo;, unveiled at last week&rsquo;s annual meetings in Hanoi, says merely because east- and south-Asian economies, and recently India, have done well over the past quarter century does not mean they will continue to do that without addressing a range of challenges.

Continental drift

The Reserve Bank of India&rsquo;s (RBI&rsquo;s) regulations for microfinance institutions (MFIs) registered with it as non-banking finance companies &ndash; these make up most of the MFI space &ndash; have been largely welcomed by the sector. There are several reasons for this. One, there are now at least some rules to go by, good or bad &mdash; one of the main problems earlier was the absence of such rules. Two, the sector finds the regulations to be a considerable improvement on the Malegam committee&rsquo;s original proposal. This indicates that the regulator is willing to listen to the practitioners, thereby adding meaning to the interactions that took place after the committee&rsquo;s report was released. It also implies that the issues on which the sector continues to have doubts are likely to be addressed once the guidelines are put in place and the consequences become apparent.

Back on the rails

While sharp political differences between the two main national political parties, the Indian National Congress and the Bharatiya Janata Party (BJP), are understandable and quite natural, both are obliged to ensure that India&rsquo;s federal structure is not weakened and day-to-day governance is not harmed by their political rivalry and the egos of their leadership. The BJP&rsquo;s anger against the Congress, as reflected in the proceedings of the BJP chief ministers&rsquo; conclave this week, should not cross the point where the relationship between the Centre and the states of the Union is damaged. As India&rsquo;s two major national parties, which are also leaders of the two contending coalitions, the United Progressive Alliance and the National Democratic Alliance, both the Congress and the BJP owe it to the nation that they learn to manage their differences in a reasonable manner.

Non-cooperative federalism

The recent arrangement reached by India and Iran, under which India would pay for oil imports from Iran in rupees, concludes the effort to find an alternative mode of payment, following the termination of the mechanism using the Asian Clearing Union as a conduit late last year, following pressure from the United States. Subsequent efforts to route payments through German banks and the United Arab Emirates also did not fructify for much the same reason. It would be interesting to see how durable the present arrangement is, given the United States&rsquo; determination to bring Iran to its knees, by choking off its main source of revenue &mdash; petroleum exports. The oil-for-rupee deal struck by the two countries is reminiscent of a similar arrangement between India and the erstwhile Soviet Union, which allowed India to pay for Soviet imports (mostly defence equipment and crude oil) in rupees, an arrangement that continued until the collapse of the Soviet Union in the early 1990s.

Unusual business

The subdued response to the merger and acquisitions (M&amp;A) rules notified on Wednesday shows that the Competition Commission of India (CCI) has paid some regard to India Inc and the legal fraternity&rsquo;s concerns. By softening the rules from the somewhat stringent guidelines issued earlier this year, the CCI has clearly acted within the parameters of extant political economy and sent clear signals to the domestic and international investing community that the M&amp;A regulation regime would, on the whole, be relatively benign. For example, the exemption of M&amp;As that take place before June 1 from the purview of the new rules has calmed investor anxieties considerably, especially for Vedanta, which is struggling with a raft of other issues over its acquisition of Cairn India. By slashing filing fees from a steep Rs 40 lakh to a nominal Rs 50,000, the CCI has certainly lowered transaction costs.

Flexible on mergers

Six months of investigation, mostly through telephone-tapping, 12 months of analysis of evidence and prosecution, 11 days of deliberation and, finally, a conviction. Galleon Group founder Raj Rajaratnam&rsquo;s journey from being suspected of fraud to being punished and jailed would have taken less than two years by the time the saga ends next month. In Hyderabad, Satyam&rsquo;s founder Ramalinga Raju is still an undertrial and remains in custody for more than two years since he confessed to financial fraud. No one can guarantee how long Mr Raju will remain in jail and when he can expect to get bail.

Trial as punishment

Incisive columns and editorial comment by top opinion leaders

Page 506 - Editorial Comment