Calibrated globalisation used to be the Bharatiya Janata Party&rsquo;s buzz word for doing it differently. Accusing the Congress Party of opening up too fast to external flows, of goods and capital, echoing the worries of the now forgotten &ldquo;Bombay Club&rdquo; and mindful of the internal critics like the Swadeshi Jagran Manch, the BJP used to claim that its own model was one of opening up step by step. It is an art that the Congress Party and the government led by it has perfected.

Calibrated globalisation

Business Standard

In the pre-budget Economic Survey 2010-11, the Union finance ministry made a strong pitch for the pro-growth impact of investment in human capital adding, &ldquo;fortunately, there is awareness of this in India and efforts are afoot in terms of budgetary allocation and actual initiatives to boost the development of skill and human capital.

Boosting human capital

Government bond markets have responded positively to the Union budget. The benchmark ten-year bond yield often used as a reference rate for other bonds and loans has dropped by 8 basis points (a basis point is a hundredth of a percentage point). Yields are inversely related to bond prices and a drop in yields of this quantum corresponds to a fairly healthy rally in the bond market.

Bonds in a sweet spot

In his 197 paragraphs speech, running into an hour and 45 minutes of time, Union finance minister Pranab Mukherjee devoted precisely one paragraph to the nation&rsquo;s defence budget. This paragraph (para 116) reads: &ldquo;In the Budget 2011-12 a provision of Rs 1,64,415 crore has been made for Defence services, which include Rs 69,199 crore for capital expenditure. Needless to say, any further requirement for the country&rsquo;s defence would be met.

Defending defence

The Union budget marks a watershed in the life of the Indian information technology services industry, akin to a family&rsquo;s coming of age rites of passage! The end of support to a growing youngster is implicit in two measures that signal the end of special treatment. One is the sunset of the software technology parks of India (STPI) and sections 10A/10B via which tax sops were given to the IT-BPO sector in its growing years. The other is the general measure that extends the minimum alternate tax (MAT) to units in special economic zones (SEZ). When the impending sunset of STPIs and the tax concessions that when with the scheme appeared on the horizon, large IT-BPO operations made a beeline for SEZs in order to continue to receive tax benefits.

End of infancy

Union finance minister Pranab Mukherjee has been able to convey the impression that the agricultural sector was a key area of policy focus for his budget, but just about. He has chosen some good policies and programmes to boost agricultural development, but has done so in a half-hearted manner. Whether the agricultural sector actually benefits from his attention remains to be seen given that he has been niggardly in the allocation of financial resources. Most programmes have been allocated paltry sums of around Rs 300 crore each. These include integrated development of 60,000 pulse villages, promotion of oil palm, setting up of vegetable clusters, popularisation of millets, augmentation of fodder resources and national mission for protein supplements through development of livestock, dairy, piggery, goat rearing and fisheries. What impact a measly Rs 300 crore has on the livelihood of targeted beneficiaries numbering in millions can well be imagined.

Bharat Nirman

India is poised to join the coveted club of economies whose national income, or gross domestic product (GDP), exceeds $2 trillion. According to recently released data, India&rsquo;s nominal GDP is expected to grow at 14 per cent in 2011-12, to reach Rs 90 lakh crores. At a dollar exchange rate of Rs 45, this works out to $2 trillion.

Two-trillion India

Prime Minister Manmohan Singh should use the opportunity provided by the Supreme Court&rsquo;s verdict, on the appointment of P J Thomas as chief vigilance commissioner (CVC) of India, and the Dravida Munnetra Kazhagam&rsquo;s threat, to withdraw its ministers from the Union cabinet and offer outside support, to seek a vote of confidence from Parliament. The PM and his government will, in fact, secure that vote of confidence, both because no political party wants the life of the present Lok Sabha to end, and also because the ruling Congress Party still has numbers with it. In seeking and securing a new vote of confidence, the Manmohan Singh government would also secure a new lease of life. The government has been battered, beleaguered, demoralised and directionless in the past few months. The PM has set in motion several correctives that will help improve governance in future.

Vote of confidence

While the former managing director of McKinsey &amp; Co, Rajat Gupta, has every right to claim that he is innocent until otherwise established in a court of law, he must adopt the same standards of good conduct in India as he has been required to in the US. If Mr Gupta chose to step down from the boards of various institutions he has been associated with in the US, he must do the same in India. Mr Gupta must step down as chairman and managing director emeritus, Indian School of Business (ISB) and chairperson, Public Health Foundation of India (PHFI).

Bonfire of vanities

If there was ever a decision that proved that the All India Council for Technical Education (AICTE) isn&rsquo;t doing its job properly, it is its blanket ban on part-time MBA courses. This means that the regulator for technical education will no longer approve such courses and those that are in operation will not be given permission to extend them once they are completed. In other words, by 2012, there will no longer be any AICTE-certified part-time MBA courses. AICTE officials say the rational for doing this is that several B-schools are misusing the facility, running other programmes under the guise of an MBA course and are even recruiting fresh graduates instead of those with work experience. This is undoubtedly true, as any recruiter will attest. But there are also many reputed institutes running decent part-time courses.

Mindless regulation

Marine fisheries in India has steadily been losing out to inland aquaculture, in terms of fish production, but its relevance for exports has not diminished. Given that marine exports have not done too well in recent years, reports of marine export trade registering a record $2-billion mark in the first nine months of this year is significant. During this period, seafood exports have seen a 6.6 per cent growth in terms of quantity and nearly 19 per cent growth in value, that too in the face of an appreciating Rupee. The marine export business seems upbeat &mdash; and justifiably so &mdash; and hopes to touch the $2.5 billion mark by year-end. However, this laudable performance is not yet being driven by improved supply side response. Rather, it is the sharp rise in global demand, especially in major overseas markets like the US, European Union and Japan that is pushing prices and profitability up.

Hook, line and sinker

Union finance minister Pranab Mukherjee has ruled in favour of the Reserve Bank of India (RBI), rather than the Competition Commission of India (CCI), regulating bank mergers and acquisitions (M&amp;As). This is right as RBI has unique historical expertise in supervising the banking sector whereas the commission is a relatively newborn entity. As a transitional policy this may get applied to the insurance sector also with the Insurance Regulatory and Development Authority (IRDA) being the relevant institution. However, in the long run and as the CCI comes to establish itself as a credible and competent organisation, with adequate inhouse expertise in the financial sector, there is no reason why the CCI should not be the institution overseeing all M&amp;A activity, across sectors. The challenge of evolving a policy on consolidation among public sector banks is complicated by the fact that the government is the owner on both sides of a proposed M&amp;A deal.

Banking on mergers

Opinion remains divided on whether or not the continuing instability in West Asia and North Africa (WANA) will continue to drive up global crude oil prices, and therefore India&rsquo;s oil import bill, or whether, in fact, there would be a correction based on OPEC addressing concerns about supply. Either way India cannot, as of now, take things for granted. A medium-term energy security strategy needs to be put in place, based on the assumption that India&rsquo;s growth and balance of payments can be potentially hit by a possible terms of trade shock. Given renewed concerns about global growth, it is entirely possible that there could be a slowing down of global trade and increased volatility in capital flows.

Oil slip again

These are dog days for microfinance in South Asia. The Bangladesh government could not have done itself a greater injustice by successfully ousting, for the time being at least, Muhammad Yunus from the top position of the internationally renowned Grameen Bank. An appeal against the high court ruling is being made, and it remains to be seen whether the Supreme Court will overturn the verdict. A developing country like Bangladesh, still in need of global goodwill and assistance, can ill afford to squander the equity that Professor Yunus created for it, first by successfully pioneering the idea and practice of microfinance, and then winning the Nobel Prize for it. A Nobel laureate is a national asset in any country and a government in its senses would co-opt the winner to reap all the soft advantages that such an association would bring. Instead Prime Minister Sheikh Hasina has unleashed an undisguised vendetta against a distinguished son of her nation.

Forcing Yunus out

The International Monetary Fund (IMF) has always been a quasi -economic and quasi-political institution. For all the hard bargaining and tough talking that IMF teams do with debtor nations, how the chips finally fall is almost always a function of political grand bargains between debtor nations and the Fund&rsquo;s principal shareholders. Which is why it is not surprising that an IMF team that has been stationed in Islamabad for over a week has decided to extend its stay by another three days rather than pack its bags and fly back because talks between the Fund and the Pakistan finance ministry were going nowhere.

Bottomline in Pakistan

The yawning gap between farm gate and market prices of agricultural commodities, including food and vegetables, and the role of distortions in agricultural produce marketing in fueling food inflation have been in the news in recent months, and were discussed in the meetings of the Union cabinet. The view that marketing reforms are vital to reducing this gap has now been endorsed by a group of chief ministers on food prices, headed by Gujarat chief minister Narendra Modi. The Modi group&rsquo;s report was submitted to the prime minister last week. The CM&rsquo;s panel has recommended liberalisation of agricultural markets by allowing direct marketing and contract marketing. It has sought an end to the monopoly enjoyed by agricultural produce marketing committees (APMC) in routing farm produce to consumers, recommending greater involvement of private organised sector or cooperatives in retail trade.

View from the field

The glib talk of a &ldquo;demographic dividend&rdquo; seems to have erased all concern about population growth from public discourse in India. The term &ldquo;family planning&rdquo;, or even the politically correct term of &ldquo;family welfare&rdquo; has all but disappeared from the national lexicon, including the Economic Survey and Budget documents. At a time when even China is, in fact, reviewing its &lsquo;one child&rsquo; policy and many economies around the world are more worried about ageing, India is one of the world&rsquo;s youngest countries with more than half the population below 30 years of age. Also, the fertility rate, or the number of children per woman, has been declining steadily, almost halving from the late sixties through 2009. In several states where prosperity and education levels are higher &mdash; Andhra, Kerala, Punjab &mdash; among them fertility rates have fallen below replacement levels, putting them on a par with some advanced nations.

Demographic divide

The Supreme Court, in keeping with its current stance, has taken a bold and progressive step in legalising passive &mdash; or unassisted &mdash; euthanasia. This places India among a handful of nations like the Benelux countries and Switzerland, which allow some form of mercy killing. In keeping with the enormity of the change that it has ushered in, the court has also put in place stringent safeguards to render negligible the chances of abuse.

No life without dignity

The massive earthquake that logged 8.9 on the Richter scale, and the tsunami that struck northeastern Japan, have wrecked enormous havoc on Japan taking a huge toll in terms of life and property. Worse, the misery heaped by nature has been made worse by human failing with a nuclear power plant being impacted by the quake and leaking radiation into the atmosphere. Japan will take a long time to recover from the destruction and the psychological impact of human failure. For a nation that takes great pride, and justifiably so, in its technological competence and organisational capability, the tragedy of the nuclear accident would be felt as deeply as that caused by nature. While the nuclear accident is a tragedy, global response to it should be one of learning lessons and not debunking nuclear energy. Japan has no other equally important source of power and so cannot run away from nuclear power. But it has the ability to learn and improve technology.

The sun will rise

The Securities and Exchange Board of India&rsquo;s (SEBI) latest circular on mutual funds has helped rationalise the usage of accumulated and unspent entry load of the mutual funds. Whether this is a &ldquo;UK Sinha effect&rdquo; or just institutional rethink is not clear but mutual funds have begun reading the tea leaves and drawing some solace! It would be comforting for them to believe that the regulatory pendulum could now swing away from the Bhave era. This is a matter of management of rational expectation on the part of the regulator and the regulated. If the Indian mutual funds could have their way, the date 30 June, 2009 would not exist. It was the day on which the market regulator, in fulfilment of its responsibility of investor protection, abolished entry loads for all mutual fund schemes, and left it to the investors to pay directly the mutual fund distributors based on an investor&rsquo;s assessment of their services.

Mr Sinha's sweetener

Assume for a moment that the Reserve Bank of India (RBI) did not have to come forward with any press release on monetary policy this coming Thursday. After all, there was a time when the central bank took a view on monetary policy only twice a year and it was not long ago that it yielded to the market&rsquo;s Q-culture. RBI Governor Duvvuri Subbarao, a half marathon runner himself, chose to become more quick footed in his responses and decided to come forward with a mid-quarter statement. While he did say in a recent speech that &ldquo;Notwithstanding the scheduled quarterly and mid-quarterly reviews, we (RBI) reserve the right to alter our policy stance at any time to respond to the evolving macro-economic situation,&rdquo; the fact is that once a date for making a statement gets fixed, the RBI comes under pressure, from public expectations, to say something or the other.

Subbarao's date

Incisive columns and editorial comment by top opinion leaders

Page 513 - Editorial Comment