New Delhi&rsquo;s expanding Metro system is changing lifestyles and living patterns in the nation&rsquo;s capital in a variety of ways, some perhaps not even anticipated. It is not clear if the Metro&rsquo;s planners anticipated the fact that spending an evening on New Delhi&rsquo;s Boat Club lawns, the green expanse stretching from the Parliament House and the Central Secretariat at one end of Rajpath to India Gate at the other end, would become attractive and affordable to lakhs of Dilliwallahs holed up in little boxes in Delhi&rsquo;s far-flung colonies. The ease with which people can commute has not only made the Boat Club lawns an attractive venue for family outings but also an easy place to mobilise crowds for whatever cause, as all the candle light gatherings testify to.

Life after the Metro

Business Standard

With barely six weeks to go for the next international summit on climate change, in Durban, India is making every effort to dispel the impression, created by the flexibilities it displayed at the last two summits, that it had ditched the developing countries on key aspects of the negotiations on how to deal with climate change. New Delhi has used every available international forum in recent months to go back to its original posture on the subject, insisting on greater binding commitments from the developed countries before beginning to discuss the developed countries&rsquo; demand for mandatory action by all nations on limiting global warming.

Back to basics

L K Advani&rsquo;s sixth yatra seems to have been undertaken under an evil star. While its ostensible purpose was to cleanse public life of corruption, it was generally seen as a gambit for projecting himself on the national stage and thereby remaining in some future race for prime ministership. The yatra proved accident-prone, as the bus got stuck under a bridge, and then malfunctioned; senior Bharatiya Janata Party (BJP) leaders fell ill &mdash; probably after ingesting carbon monoxide. Matters got worse when party workers in Madhya Pradesh were caught handing out cash to local reporters in return for favourable coverage of the yatra &mdash; thereby also establishing that newspaper proprietors are not the only people in the media who indulge in the practice of &ldquo;paid news&rdquo;, journalists do the same.

Ill-starred yatra

The worst of the coal crisis may be over, and the country may be able to avoid the power crisis that had seemed imminent as coal stocks with power stations ran down to critically low levels. This is because Coal India, which supplies the bulk of the coal that feeds power stations, has managed to ramp up supplies from 0.6 million tonnes a day to nearly a million tonnes; the usual level is 0.9 million tonnes. The Railways has helped by providing more wagons than usual. Coal supplies had been hit over several weeks because of the flooding of coal mines following heavy rains in parts of the country, the disruptions caused by the Telangana agitation, and a one-day strike by workers last week, supporting their demand for a higher bonus. Coal stocks at some power stations had dropped to a couple of days&rsquo; supply, bringing back memories of the periodic supply crises that used to erupt in the seventies and eighties.

Strikes and shortages

Last weekend&rsquo;s meeting of the finance ministers of the G20 countries has not produced any breakthroughs in terms of the immediate crisis facing the group, namely eurozone; the matter has, therefore, been left to be resolved by the eurozone countries, who are meeting separately this coming weekend. The proposal to give greater financial firepower to the International Monetary Fund came a cropper, as countries ranging from the United States to Australia were all opposed; judging by the admittedly scanty reports. India seems to have sat on the fence but may have been willing to go along, unlike some other Brics countries. India&rsquo;s focus at the meeting seems to have been on greater information sharing with regard to bank transactions and related tax issues in offshore financial centres.

G20 leaves it to eurozone

As a rule, too much should not be read into by-election results, influenced as they often are by local factors that do not have national sway. Also, three of the four results of by-elections announced on Monday saw parties retaining their seats; only one seat changed hands, in Maharashtra, where the Bharatiya Janata Party bested the Nationalist Congress Party. Nevertheless, it is hard not to draw some broad conclusions from the results of the four elections, especially if two other elections whose results are yet to be announced (in Tamil Nadu and Puducherry) also end with defeat for the United Progressive Alliance (UPA). A final score of 0-6, if that is what results, should shake up the UPA.

Warning signals for UPA

It is a sign of the times that the government&rsquo;s auditor should sound off on the credibility of the government being &ldquo;at its lowest ebb&rdquo;. Imagine a company auditor sounding off about the credibility of the firm&rsquo;s management, when all that he is required to do is to certify that the accounts are in order, and the extent of over-reach becomes clear. The Comptroller and Auditor General&rsquo;s (CAG) comments frequently find an echo in judicial pronouncements, some of them in the form of off-the-cuff remarks from the bench and some in the form of judgments that seek to take on executive functions. The new Press Council chairman is yet another example of someone who sounds off on all manner of issues, and talks of exercising power that the law does not give him (like cancelling newspaper registrations, and imposing fines on publications).

State and stasis

News reports have quoted anonymous sources in the Union finance ministry as saying that the State Bank of India (SBI) management seems to be more interested in using the Moody&rsquo;s downgrade to wrest more capital from the government than improving its functioning. On the latter, attention has been drawn to the level of non-performing assets (NPAs). This is unfortunate since it is likely to adversely impact a management that is doing the right thing and should be appreciated instead.

Way forward for SBI 

This year&rsquo;s paddy procurement season has started with foodgrain stocks being more than double the buffer stock norms. An increase in grain stocks will put a strain on the already-scarce warehousing space, with consequences for safe storage and usability. Thus, excess holding of grains ought to be avoided. Maintaining a stockpile of nearly 55 million tonnes, with average economic cost of wheat and rice being Rs 18,000 per tonne, would mean locking up resources worth Rs 1,00,000 crore. Worse, it would push up the food subsidy bill to over Rs 90,000 crore this year. This is a clear sign of flawed food policy and bad economics: repeated annual hikes in minimum support prices (MSPs), nearly doubling them between 2004 and now; and open-ended official procurement, resulting in mopping up of over 90 per cent of post-harvest market arrivals in the major procuring areas. All this has given the government virtual monopoly over the food business, marginalising private trade.

Dealing with grain glut

Deepavali, or Diwali, is a festival of lights. In congested urban India it has increasingly become a festival of noise. Hence, any campaign against noisy crackers and in favour of the more colourful and less polluting ones should be encouraged. School-going children across the country in many liberal institutions of education resolve every year not to contribute to noise and air pollution. Awareness regarding the adverse health effects of both air and noise pollution is growing as the problem grows. However, Deepavali is not the only festival that contributes to the problem of noise pollution, nor is the problem merely an annual feature. Consider the growing use of sound amplifiers at religious gatherings and around places of worship &mdash; be they temples or mosques or temporary gatherings around events like Bhagwati Jagrans and public discourses.

All sound, no fury

When you give a gun to a soldier and then send him into battle to fight an identified enemy, he&rsquo;s bound to shoot. So those who blame the Reserve Bank of India (RBI) for shooting by increasing interest rates in its declared battle against inflation are of course being unfair. Monetary policy is the only credible weapon in the central bank&rsquo;s armoury and it is bound to deploy it.

Pause, please

India&rsquo;s merchandise exports sector appears to be on steroids, defying even the logic of an economic slowdown. At a little over $8 trillion, global exports in the first half of 2011 grew by 22 per cent. Compared to that, India&rsquo;s exports of merchandise goods, estimated at $153 billion in the same period, grew by a staggering 44 per cent. That&rsquo;s not all. India&rsquo;s exports gained fresh momentum during the third quarter of 2011, when the growth rate jumped to 54 per cent, proving wrong even the government&rsquo;s forecasts of an exports slowdown from August onwards. Economists are also at pains to explain the apparent disconnect between a tepid industrial growth rate witnessed during this period and the robustness of its merchandise exports.

The exports riddle

Those in charge of the search for a suitable successor to Ratan Tata, who heads the group that bears his name, seem to be sweating for a solution. Reports have suggested that Indira Nooyi of PepsiCo was offered the job, but declined. Other names have been mentioned in unconfirmed reports, like Arun Sarin, the former boss of Vodafone. With none of them either found suitable or willing, the default position voiced some time ago by one member of the search committee was that no one person fits the bill. This is only to be expected, given the enormous stature that Mr Tata has acquired during his leadership of the group over nearly two decades. So if the committee is now obliged to look for second-best solutions, should it suggest splitting the job? This newspaper reported yesterday that the group holding company, Tata Sons, may be given a CEO, separate from the chairman.

A Tata after Tata

When bright young Indians write the civil services examination they opt for security of tenure and an assured pension that comes with the requirement that they observe service discipline, respect the principle of seniority and remain self-effacing till retirement. For years that is how the Indian Administrative, Foreign, Police and other Services (IAS, IFS, IPS, etc) functioned. Over the years the principle of seniority has become so much of a mantra that governments are increasingly scared of using competence as the measure for promotion, shying away from deep selection and sticking to the rule book. However, for their part, civil servants are neither adhering to established practices of service discipline nor are they any longer self-effacing, seeking publicity for themselves every which way.

Uncivil service

Caught between the compulsions of its own dharma, of fighting inflationary expectations and keeping inflation low, and the sentiments of the markets, corporates and policymakers in New Delhi, the Reserve Bank of India has opted for the middle path, eschewing the bravado of a pause but shying away from stiffer action. In continuing with its 25 basis points &lsquo;baby step&rsquo; hike, while assuring the market that it may then pause for at least a quarter, governor Duvvuri Subbarao has fired what would seem to be his last bullet. If even this action does not subdue inflationary expectations, he would either be forced to use heavy weaponry or be more candid in drawing attention to all the factors beyond a central bank&rsquo;s control that seem to be driving inflation and slowing growth.

Halfway house

The sharp rise in the absolute value of India&rsquo;s external debt in recent months merits serious attention. While the absolute volume of external debt rose by an average of $1.8 billion a year between 1990-91 and 2002-03, it has risen by over $25 billion on average over the next eight years. For the last two years, the increases have been $36.5 billion and $45 billion respectively. Even if one normalises for the increasing engagement of India with the global economy, the recent acceleration in the accretion of external debt is a cause for concern. The reasons for the recent surge in external debt can be broadly classified as capital flows into India by foreign institutions seeking to leverage the interest rate differential between India and their respective countries, and External Commercial Borrowings (ECB) by Indian corporates for much the same reason.

Not as well buffered

At one level, the move to allow foreign airlines to invest in domestic carriers can be viewed as a transparent attempt to bail out Vijay Mallya&rsquo;s profligate Kingfisher Airlines and the deeply troubled (and even more profligate) state-owned Air India. At another, it might just be the tonic that the cash-strapped Indian aviation business needs to stay aloft and open the Indian skies to global competition. Either way, the issue the Cabinet will consider shortly is far trickier than votaries for a wholesale open skies policy may suggest. For one, there is the question of foreign control. The department of industrial policy and promotion under the industry ministry favours a 26 per cent limit on FDI or even 49 per cent and the aviation ministry 24 per cent, the two percentage point difference representing the managerial power the foreign investor needs to block a special resolution or not.

Cruise control

For an association that is unable to discipline its own members and get them to act on domestic policy issues, the European Union appears quixotic seeking to unilaterally impose a carbon tax on all airlines flying in and out of Europe. The proposal will require all airlines touching EU airports to buy emission reduction permits to offset the carbon dioxide discharged by them in excess of the caps fixed under the EU&rsquo;s internal emission trading scheme. As could be expected, all the non-EU airlines are up in arms against the move. Non-EU governments are livid since they regard the move to tax the entire flight journey of an aircraft, rather than only its use of EU airspace, totally unacceptable in principle. This view is now supported by global aviation bodies, such as the International Air Transport Association (IATA), the International Air Cargo Association and domestic apex airline organisations of China, the US and some other countries.

EU unilateralism

The political transition in Libya, even if messy, offers a wonderful opportunity for Libya to leverage its tremendous oil reserves for the benefit of its people after over four decades of mismanagement. Libya, Africa&rsquo;s biggest holder of oil reserves (and the world&rsquo;s eighth largest), has very little to show for this endowment. An irony, given that Colonel Qaddafi seized power in the name of the proletariat, only to arbitrarily demolish the very institutions needed to sustain a progressive society.

Dawn over Libya

The National Manufacturing Competitiveness Council or NMCC, may well have been set up in 2004 to provide a sinecure for a Gandhi family loyalist, since few in government took its ideas seriously in the years when overall growth stood at nine per cent and the idea of &ldquo;industrial policy&rdquo; was not yet back in fashion. NMCC Chairman V Krishnamurthy often ploughed a lonely furrow: seeking a &ldquo;level playing field&rdquo; for domestic manufacturing was still viewed as either demanding protectionism or favouritism. Moreover, in its first term in office the United Progressive Alliance (UPA-I) government was excited about its new special economic zones (SEZs) and so did not pay much attention to NMCC&rsquo;s ideas. There was also the other sub-experiment with the so-called petroleum, chemicals and petrochemical investment regions (PCPIRs). UPA-I&rsquo;s SEZs, however, fell into disrepute and UPA-II slipped into an anti-business phase.

Manufacturing a policy

The Reserve Bank of India (RBI) has at last rung down the curtain on administered lending rates by freeing the interest rate on savings bank accounts. The interest rate was pegged at four per cent in May after remaining unchanged for eight years. Banks will now be free to pay whatever they like as long as they offer a uniform interest rate on savings bank deposits of up to Rs 1 lakh, beyond which differential rates can be offered depending on the size of deposits. Being able to get away with paying less was a crutch that was offered to the state-owned banks in order to give them time to get ready to face competition implicit in a level playing field. Twenty years, since the reforms began, is a long time in which to grow up. The move will be an invaluable gain for ordinary depositors, who have been getting the short end of the stick by earning a pittance for their money at a time when inflation has been running close to 10 per cent.

Saved by RBI

Incisive columns and editorial comment by top opinion leaders

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