Never a particularly elegant term to describe the Hindi film industry, the name &ldquo;Bollywood&rdquo; was not only a particularly unoriginal one, seeking glory from imitation, but it also suffered from delusions of grandeur, as if the Bombay film industry was the only base of the &ldquo;Indian&rdquo; film industry in the way Hollywood undoubtedly was and is for American cinema. But &ldquo;Bollywood&rdquo; acquired hegemony over Indian cinema with its budgets.

Regional goes global

Business Standard

Most banks, particularly the public sector ones, have told the Reserve Bank of India (RBI) they don&rsquo;t want the savings bank interest rate freed, the last one to remain regulated. This is unsurprising as fear of the unknown and of volatility sways even the greatest votaries of business deregulation. But that is no reason why the RBI should listen to the banks. The primary argument offered by them is that freeing the rate will unleash competition (that, in itself, should be a good reason for doing so) in which state-owned banks will suffer. Their ability to compete on price is supposedly limited, compared to private and foreign-owned banks. The latter, in particularly, rely little on savings deposits and may find it beneficial to raise this rate to fetch more such deposits, thereby reducing their dependence on costlier call money.

Fear of volatility

Even as India and the European Union (EU) inch closer to threshing out a free-trade agreement, the unresolved issue of seizures by EU member countries of Indian generic drugs on their way to other destinations continues to sour relations between the two. Over a score of such incidents of unlawful confiscation of Indian drug shipments by European customs authorities have occurred in the past three years. Ironically, most of such seizures have been of generic drugs that are not patented in India or in the export destination countries, even if they had patent protection in EU member countries. Labelling them as &ldquo;counterfeits&rdquo; and charging them with violation of patent laws, are, therefore, untenable. If EU countries, under pressure to guard the commercial interests of their big pharmaceutical corporations, do not stop such dubious seizures, the repercussions would extend far beyond India.

EU trips the poor

The passenger vehicles market in India appears to be on steroids. In the first six months of the current financial year, the sales of passenger vehicles (including cars and a variety of utility vehicles) have grown by over 26 per cent. With 1.4 million units already sold in April-September 2010, the country&rsquo;s automobile industry may well reach the magical three-million sales mark for the full year ending March 2011. The sales in the second half of the year are normally 10-15 per cent more than what the industry achieves in the first half. If the current demand buoyancy at home continues, automobile manufacturers may well beat most estimates for the Indian passenger vehicles market, according to which the country will witness sales of about five million units by 2015. Achieving 60 per cent of the target five years ahead of schedule is certainly an occasion to pause and ponder over the direction the Indian automobile industry is taking in a rapidly growing economy.

Revving up for growth

Two years after the onset of the Great Recession, and a year into an as yet tentative recovery in the trans-Atlantic economies, the International Monetary Fund (IMF) believes governments in both developed and developing economies must remain active and focused on ensuring the sustainability of the recovery underway. The IMF&rsquo;s World Economic Outlook 2010 forecasts 4.8 per cent world economic growth in 2010, followed by a marginally lower 4.2 per cent in 2011. The IMF rejects the prospect of a sharper global slowdown. V it will be, not W. But, this optimism is pinned on heroic performance by the so-called &ldquo;emerging economies&rdquo; &mdash; especially China, Brazil and India. India is expected to grow by a whopping 9.7 per cent this fiscal.

A two-speed world

All&rsquo;s well that ends well. So true for the south-west monsoon this year. Though the distribution of rainfall was skewed in both time and space, the belated surge in monsoon activity in September, when it should normally have been winding up, camouflaged these drawbacks to leave an overall positive impact. Till August-end, the cumulative monsoon rainfall was below normal. This deficit was made good in the last month of the four-month season (June to September).

Rain, rain, come again

When criticised about the US administration&rsquo;s exchange-rate policy vis-&agrave;-vis the yen, former US president George H W Bush apparently retorted in a fit of pique, &ldquo;Let the Japanese handle their exchange rate and we will handle ours.&rdquo; Unfortunately, this bit of curious Texan logic doesn&rsquo;t quite hold in the world of currencies. One currency&rsquo;s gain is tautologically another&rsquo;s loss. If the dollar loses, the rupee gains &mdash; there are no two ways about it. Thus, in a world of interlinked economies and financial markets, the macroeconomic strategies of one economy impinge on another through the currency route. It is impossible for economic policy to be truly independent. This inescapable connection between economies via currencies poses the risk of an impending currency war. The battle line has been drawn by the two-track growth environment that the global economy finds itself in.

The currency wars

The restructuring of banks&rsquo; loans to troubled airlines, which the Reserve Bank of India (RBI) has allowed, is taking its time. The banks are seeking greater concessions from RBI than it has authorised in the first instance. Under normal circumstance, such restructuring will result in these loans initially being classified as non-performing assets, requiring higher provisioning. This will obviously impact banks&rsquo; bottom lines. Banks are seeking this round of restructuring along the same terms as the one RBI allowed last year as a general response to the economic downturn. But the regulator&rsquo;s attitude seems to be that the earlier dispensation was an exceptional measure required by exceptional circumstances. Today, not only is the Indian economy again on a healthy growth path, the airlines&rsquo; fortunes are also looking up, as are banks&rsquo; balance sheets. Hence a second relaxation, that too for a particular industry, does not seem to be justified.

No bailout needed

The telecom market boomed when tariffs and handset prices started falling; so did the consumer durables market. Over the past decade, both businesses have actually seen prices either stagnate or drop as a result of competition. Although the nature of these businesses is not strictly comparable, the market for direct-to-home (DTH) services can be called contrarian. Despite being available at a premium to cable and the Conditional Access System (CAS), India&rsquo;s DTH reach has grown so fast that it is soon expected to overtake the US to become the world&rsquo;s largest market by the first quarter of next year. India now has 26 million subscribers and is expected to end the calendar year with 30 million. By March next year, the number is expected to touch 32 million, making it the world&rsquo;s largest market, accounting for more than a fifth of the global market.

When transparency pays

The fresh initiative by Commerce Minister Anand Sharma to meet ambassadors of the key members of the World Trade Organisation (WTO) in Geneva, in a bid to revive the deadlocked Doha round of trade negotiations, is well-timed though a positive outcome may be doubtful.

Reviving Doha

Politics in Karnataka has touched an all-time low with the manner in which the tumult of the last few days culminated in a vote of confidence passed without a ballot in five minutes amidst scenes of unprecedented violence and entry of police into the state assembly. Whatever be the final outcome, there is no doubt that the state has been set back on several counts. The first and the most immediate casualty is political stability. The government, which has remained in power for two years with the help of independent members and defections, now has to contend with rebels from within the ruling BJP who have refused to budge despite pressures to return to the fold. It is highly doubtful if under such conditions the state, once considered a leader in many respects, will be able to witness either growth or social stability.

Karnataka's issueless politics

The Nobel Prize in Economic Science for 2010 has been awarded to two Americans, Peter Diamond of the Massachusetts Institute of Technology and Dale Mortensen of Northwestern University, along with a naturalised Briton, Christopher Pissarades, for their work in search theory, which, among other applications, rigorously explains the coexistence of unemployment and job vacancies in market economies. The award has been widely hailed given the centrality of the theory to provide a macroeconomic analysis of the labour market. While the underpinnings of the theory were established by Diamond in the early 1970s, Mortensen and Pissarades have deepened the theory later.

Understanding labour markets

India has more billionaires than China but scores worse on the Global Hunger Index than China. That says it all. All global indices have some flaw or another and are at best approximations to the truth and not necessarily the truth itself. Moreover, rankings on any index are a function of definition and weights. However, accounting for all such caveats, India must still hang its head in shame that it is in the company of a block of 25 countries, including sub-Saharan Africa, where the hunger level is alarming. It shares this dishonour with some of the most underdeveloped countries of South Asia and Sub-Saharan Africa, such as Ethiopia, Angola, Zambia and Timor-Leste. India ranks 67 with Nepal at 56, Pakistan at 52 and Sri Lanka at 39. Only Bangladesh at 68 ranks below India in South Asia.

Hunger and duty to feed

Now that India has been elected as a non-permanent member of the United Nations Security Council (UNSC), for a two year term, the government and India&rsquo;s diplomatic and strategic policy community have to decide what to do with it. There is no doubt that India has come a long way from the ignominious defeat of 1996, when India lost the UNSC Asian seat to Japan 40:142 votes, winning this time 187:5 votes. India&rsquo;s economic rise in the past decade and its new strategic relationships with several major and rising powers have all contributed to this impressive vote in its favour. However, getting into the Security Council is only the first step. India&rsquo;s problem is that on many vital global and regional issues, there is no genuine national consensus at home.

At the high table

Nothing energises the Indian capital market the way a mega public sector issue does. Normally, from day to day, the Indian stock market moves up and down on foreign cues. But it is the prospects of participating in a bit of the government&rsquo;s sale of family silver that really take the shareholding community and habit forward. In this sense, the Coal India IPO could have hardly come at a more important moment. A question mark hangs over the future of the current stock market rally because the lay investor is significantly missing, unlike during other such rallies. Hence the need to liven things up, create a buzz and a hype that can make the idea of owning shares attractive. Independent analysts&rsquo; evaluation indicates that the government is not repeating the mistake made with earlier public sector IPOs and at the price band declared will leave something on the table for investors.

Coal can be gold

The Government of India has finally made the mistake we had sincerely hoped it would not. It has notified the constitution of the Financial Stability and Development Council (FSDC). The institutional concession made to the Reserve Bank of India (RBI), with its governor being named chairperson of a sub-committee on financial stability, is more an act of appeasement than recantation. This newspaper took a considered view from day one that the idea of the FSDC, first proposed by Union Finance Minister Pranab Mukherjee in his Budget speech this year, was a bad one. This is in no way a comment on the minister himself. Mr Mukherjee is without doubt a wise and experienced politician. He has long years of experience in the Union government. He has been India&rsquo;s finance minister in another era and has returned to provide leadership to the ministry in a new world. While his intentions would be honourable and motivations unquestionable, it appears his thinking is outdated.

FM's wrong decision

For the past year, Liverpool Football Club has been in the throes of a fierce takeover battle that involves, among other things, court cases in the United States and Britain and the government-owned Royal Bank of Scotland. The 118-year-old club is an institution in football-mad Britain, its most successful club in European footballing history and it has an enormous global fan following. Yet not once through the months of the controversy has any politician thought fit to pronounce, unilaterally or otherwise, on bankrupt Liverpool FC&rsquo;s problems. These are certainly a big deal in a country in which the sport plays a far greater economic role than cricket does in India.

Game for politics

The Re&rsquo;s both good news and bad news from the price front. The good news is that inflation seems to be stabilising with the September number only marginally higher than the 8.5 per cent in August. More importantly, manufacturing product inflation, often described as core inflation by economists, has continued its downward trend. From 6.4 per cent in April, factory price inflation is down to 4.6 per cent in September.

Inflation and appreciation

India&rsquo;s sportspersons have every reason to be proud of their performance at the 19th Commonwealth Games. While not too many world and Olympic records were broken, the impressive performance of Indian sportspersons, especially women, has done the nation proud. Kudos also to the organisers of the events and to Delhi police and security forces for their handling of security and traffic management. New Delhi was not the chaos many feared it would be. The opening and closing ceremonies were competently handled, even if the telecast was poor and the show failed to inspire, seeking merely to entertain. While the Games ended well, all was certainly not well with the organisation and those guilty of corruption, inefficiency and mismanagement should be punished. Prime Minister Manmohan Singh did well not to waste time instituting a high-level enquiry by former Comptroller and Auditor General V K Shunglu. This is welcome activism on the part of the prime minister.

Heads must roll

The woes of micro-finance institutions (MFIs) have multiplied after the Andhra Pradesh government issued an ordinance imposing all manner of do&rsquo;s and don&rsquo;ts, and sharp penalties for non-compliance. Paperwork will increase, without any certainty that the poor will be better protected, so there is a danger of micro-finance becoming both costlier and harder to come by. But is the original sin that of the MFIs? Did they invite the regulatory attention that will now burden the whole sector? If matters are not to get worse, they need to address the concerns created by reports of suicides resulting from coercive recovery. And Andhra Pradesh will set the lead for the rest of the country, as it has the largest share (23 per cent) of micro-finance clients in India. If micro-finance is to become a nationally successful model for providing institutional credit for the poor, it has to get its act right in Andhra Pradesh.

Rework the MFI model

If nothing else, Aditya Thackeray as the head of the newly minted Yuva Sena must be applauded for his consistency in upholding the tradition of cultural intolerance that masquerades as the ideology of the mother party, the Shiv Sena. His campaign to excise Rohinton Mistry&rsquo;s novel Such a Long Journey from Bombay University&rsquo;s curriculum, for containing what he considers remarks derogatory to his grandfather and father&rsquo;s party, probably helped him pass a loyalty test that the eldest Mr Thackeray can no longer take for granted from his family. Never mind if he hasn&rsquo;t actually read the book he has deemed offensive. Much criticism has been heaped on the eagerness of the vice-chancellor of Bombay University &mdash; a nominally autonomous institution &mdash; for the alacrity with which he acceded to one pupil&rsquo;s demand, as conveyed by the Sena&rsquo;s students&rsquo; wing.

Play Mistry for me

Incisive columns and editorial comment by top opinion leaders

Page 523 - Editorial Comment