After displaying considerable flexibility in global climate negotiations at Cancun and Copenhagen, even if in vain, India seems to have stiffened its stand on several key issues for the forthcoming 17th Conference of the Parties (COP-17) on climate change in Durban later this year. This is evident from Environment Minister Jayanthi Natarajan&rsquo;s statement at the recent informal ministerial consultations on this issue in Pretoria. She sought greater commitment on emission reduction from developed countries before India could even begin to discuss the legally mandated agreement on climate change. She also ruled out international verification of India&rsquo;s voluntary action on alleviating global warming, which the country had earlier expressed its willingness to consider under the proposed &ldquo;international consultation and analysis&rdquo; mechanism for member countries&rsquo; domestic climate programmes. Clearly, India wants to keep the spirit of the Kyoto protocol alive.

The climate changes

Business Standard

Following the 11.4 per cent decline in the dollar value of the rupee over barely a quarter, the sharp slump of last week has further complicated an already tricky situation for the Reserve Bank of India (RBI). Not surprisingly, RBI Deputy Governor Subir Gokarn has expressed &ldquo;concern&rdquo; about the sharp depreciation within &ldquo;such a short period of time&rdquo;. It is hard to predict what the ramifications will be, given that the depreciation has varying implications for different economic actors. While RBI has been slow to intervene in the foreign exchange market, and it had reasons for being slow, it may have no option but to act with greater alacrity in days to come. The depreciation in the dollar value of the rupee is evidently owing to foreign capital seeking a safe haven in the US dollar, in response to the volatility currently roiling global financial markets, especially the euro area.

Riding out the storm

When India&rsquo;s Commerce and Industry Minister Anand Sharma met his counterpart in Beijing last year, he spoke mainly about India&rsquo;s yawning trade deficit and China agreed that this was a problem that needed fixing. The trade deficit has since got bigger and Indian businesses complain that they still play on a non-level playing field when it comes to China. Yet, when the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, sat down with his counterpart, Zhang Ping, chairman of the National Development and Reform Commission, they chose to focus on the big picture, the long run and the global situation, avoiding the thorny subject of bilateral trade.

Business across borders

It&rsquo;s been a good monsoon this year. Despite a tail-end splash of excessive rainfall, with consequent flooding in Assam, Orissa, Bihar, Jharkhand, West Bengal and eastern Uttar Pradesh, and anxiety in the early weeks of low rainfall, by and large this year&rsquo;s south-west monsoon, which has now started to retreat, has been benign and benevolent. The country has recorded a rainfall of four per cent above normal. Thankfully, pre-monsoon apprehensions caused by pessimistic initial forecast by the Indian Meteorological Department (IMD) have been belied. The United Progressive Alliance government has been lucky with regard to the monsoon &mdash; the rain gods have been happy to smile on it for six years out of eight over its two consecutive terms.

Munificent monsoon

Several Indian states have deployed information technology (IT) to improve the operations of their public distribution system (PDS). Madhya Pradesh has gone the farthest in this regard by issuing ration cards to only those with unique identification (UID) numbers. The state is also using the services of an IT firm. Since an IT system takes some time to be put in place and then some more to get rid of the glitches, it will be some time before a definitive assessment can be made of whether the amount spent over several years on IT has been worth it. But it must be noted right at the outset that no system, not even one based on the use of IT with any number of technical checks and safeguards, is foolproof enough to prevent misuse. Besides, IT is, at best, a technical tool and what use it is put to depends on both the quality of the system design and the attitude of those who use it.

IT and PDS

No other part of Andhra Pradesh has been more loyal to the Indian National Congress than the Telangana region. Though the first generation of separatists, led by the late Chenna Reddy, walked out of the party to form the Telangana Praja Samithi, they eventually returned to the fold. The second generation of separatists, led by K Chandrasekhar Rao, not only supported a Congress-led government in Hyderabad and New Delhi but they even hold out the hope of returning to the fold if their demand is met. An overwhelming reason for that has been the loyalty of the people of Telangana to the party that led them to freedom from the tyranny of the Nizam of Hyderabad and his marauding Razakars. Yet, for all their loyalty, it appears a rudderless party, currently at odds with itself, and a disinterested Union government have forsaken the people of Telangana.

Forsaking Telangana

The Unique Identification Authority of India (UIDAI), headed by Nandan Nilekani, appears to have come up against persistent questioning after the Union finance ministry turned down a major funding request. One issue being raised is that UIDAI remains immune from many of the financial checks and balances that any government operation has to live with. The system may have been consciously designed so that it could get on with its work with minimum fuss and ponderous procedures. Conceivably, these questions are being raised now, after the body has been in existence for a couple of years, which may have something to do with the present state of the government. The confusion within it may have emboldened those who earlier thought it wise to lie low &ndash; the project has powerful backers &ndash; to now voice their misgivings.

UID becomes fair game

It appears a committee headed by Planning Commission member Arun Maira examining the case for continued unrestricted foreign direct investment (FDI) in the pharmaceutical industry has opted to oppose the move to change the present regime. The only concession it is willing to make to the health and commerce ministries&rsquo; demand that approval of such investment be routed through the Foreign Investment Promotion Board is to ask for wider powers for the Competition Commission of India to ensure that competition does not suffer as a result of foreign takeovers. Lobbying on behalf of pharma MNCs, Andrew Witty, CEO of GlaxoSmithKline Plc, told a Mumbai audience that foreign ownership should not be viewed as a barrier to affordable medicine. He refused to buy the &ldquo;hypothesis&rdquo; that &ldquo;foreign ownership would change pricing&rdquo;. Unfortunately, this is more than a &ldquo;hypothesis&rdquo;.

Affordable medicine

Governments like setting bilateral trade targets. It is markets and traders that must deliver. While China-India bilateral trade targets have always been exceeded because the market conditions have turned out to be more favourable than official expectations, India-Pakistan trade languishes, or goes underground, because official policy in Pakistan continues to be myopic. The recently concluded talks between the trade ministers of India and Pakistan, Anand Sharma and Makhdoom Amin Fahim, set a grandiose official trade target of $6 billion for 2015, against last year&rsquo;s $2.3 billion (while unofficial trade is already estimated to be double that), but failed to resolve the long-pending matter of Pakistan adhering to its World Trade Organisation obligation of extending the most favoured nation (MFN) status to India. Both from the standpoint of reciprocity (India granted Pakistan MFN status in 1995) and legalese, Pakistan needs to move towards fulfilling its obligations.

Least favoured

The simple lesson that Prime Minister Manmohan Singh should learn from his occasional interactions with the media is that he should do this more often. Of course, at a time and place of his choosing, focusing attention on issues he considers important (so that he can guide public thinking and political discourse) and addressing doubts uppermost in the public mind.

A safe pair of hands

By staying the state government&rsquo;s hand on the return of the land acquired by the Tatas for their automobile project in Singur, the Supreme Court has injected some sense into the handling of the matter. The Mamata Banerjee government created an avoidable mess with its hasty decision to find a legislative way out of a difficult political situation.

Prudence vs populism

One individual can destroy an entire institution. Individuals are, therefore, key to the success of any institution. Yet, institutional traditions can limit the damage that individuals can do. Preserving traditions is, therefore, the key to the longevity of good institutions. Consider the two institutions in the public eye at the moment. The office of the Comptroller and Auditor General (CAG) of India and the Sri Sathya Sai Central Trust.

Institutions vs. individuals

It is ironic that 20 years after India began the process of opening up its economy to the world, the government of the day in New Delhi had to bring the issue of the acquisition of assets in the country by a global firm to a close only after a meeting of the Cabinet Committee on Economic Affairs (CCEA). Worse, it intervened in a corporate matter and imposed a renegotiation of a production-sharing contract through arbitrary procedures. Clearly, a regression in the policy-making and approval process is evident when it comes to foreign direct investment (FDI) in India, more so where natural resources are concerned. The experience of the Korean steel company Posco and of Cairn Energy and Vedanta Resources shows that India needs a more self-assured and transparent process of clearing such proposals.

The algorithms of policy

Once again a lawyer has scored over an economist at the International Monetary Fund (IMF). In choosing France&rsquo;s Finance Minister Christine Lagarde, a lawyer by profession, as IMF&rsquo;s managing director over Mexican central bank Governor Agustin Carstens, the Fund&rsquo;s board mimicked the preference of the IMF&rsquo;s founders. At its inception, at Bretton Woods in 1944, the original architect John Maynard Keynes, a distinguished British economist, was overwhelmed and irritated by the presence of far too many lawyers in the United States delegation. While Lord Keynes sought to build a global central bank and had an economist&rsquo;s vision, his American counterpart, Harry Dexter White, and his legal eagles built a multilateral institution that the United States could dominate and control.

Ms Lagarde's brief

Increased competition in the automobile market is contributing to squeezed profit margins, on the one hand, but better deals for the consumer, on the other, including the introduction of newer models by smaller players, threatening the auto biggies&rsquo; hold on the market.

Subsidising auto pollution

Does the year-on-year slowdown in supply-side activity witnessed in recent months indicate a deeper malaise by way of an economic slowdown? Not necessarily. Year-on-year growth of the core sector in May 2011 was 5.3 per cent as opposed to 7.4 per cent in May 2010 and mirrored the slowdown in the growth of the overall economy during the period. Crude oil (9.7 per cent versus 5.3 per cent), fertilisers (7.3 per cent versus a decline of 6.7 per cent) and electricity (10.3 per cent versus 6.4 per cent) actually performed better during the most recent period, while steel (6.1 per cent versus 9 per cent) underperformed. The sharpest decline in production was in the natural gas and cement industries, in which growth declined by 9.6 per cent and 2.3 per cent, respectively. The sharp fall in natural gas production is largely owing to considerably lower output from Reliance Industries Limited&rsquo;s D6 field for a variety of reasons that were discussed in detail in this space.

Building a solid core

If I had a world of my own, said Alice, &ldquo;everything would be nonsense. Nothing would be what it is, because everything would be what it isn&rsquo;t. And contrary wise, what is, it wouldn&rsquo;t be. And what it wouldn&rsquo;t be, it would. You see?&rdquo; In Alice&rsquo;s wonderland the judiciary would do the executive&rsquo;s work, civil society would do Parliament&rsquo;s, Parliament would do the judiciary&rsquo;s, and the government would run business. Such an upside-down world could become a reality if recent trends in governance in India are allowed to go unchecked. Even before the country has recovered from the charade of a self-appointed civil society group drafting a Bill for Parliament&rsquo;s consideration, two learned judges of the Supreme Court of India have taken charge of an open-ended investigation into black money hoarded abroad, directing the head of India&rsquo;s premier intelligence agencies to report to it directly through a special investigation team.

Flawed judgement

After much deliberation by many wise heads, including a group headed by Finance Minister Pranab Mukherjee, the mines ministry appears to have secured a consensus in favour of giving landowners displaced by mining 26 per cent of the profits from mining operations. While the necessary amendment to the relevant legislation has not yet been approved by the Cabinet, that can happen soon. This is unfortunate since mining interests across the board had opposed the provision vigorously during the deliberations. No business interest will willingly give up a share of profits, so the business opposition to the idea is understandable. But the flaws in the concept go deeper and militate against the fundamental objective of ensuring the landowner, usually a tribal, a better return on what has been not just his livelihood but also a way of life and making him part of the development process.

Compensating the displaced

The interim report of the task force set up to work out a way to transfer cash subsidies directly to the consumers of cooking gas, kerosene and fertilisers marks a major step in using the management and information technology skills that Nandan Nilekani brings to bear on government systems, which need fixing. If technology and good management could deliver better governance then this could turn out to be an uplifting success story. The outcome will depend on the learnings from the various pilots that will test the interim road map. However, two aspects are clear. Direct payment of subsidy, provided it is carried out with necessary policy changes, can produce enormous gains by stemming leakages along the supply chain and raising the efficiency of the whole operation. By using Aadhaar (unique identification number)-linked accounts to route payments, impersonation and fictitious beneficiaries can be eliminated.

Cash to the consumer

The rising demand for commodities in India is encouraging what economists have dubbed cross-country &ldquo;land grabs&rdquo; &mdash; long- term leasing of land to produce natural resources. Raw silk is the latest in the line of such contractually-produced commodities. The Union textile ministry is reportedly exploring opportunities in Africa to secure supply of silk. Several African countries are seeking overseas direct investment by Indian companies, some through joint ventures, to promote silk production and export. The move to diversify sources of silk is also aimed at reducing the Indian silk industry&rsquo;s excessive dependence on China. A bulk of the indigenous output of silk comprises multivoltine silk produced by silkworm species that reproduce several times a year. But this is poor-quality silk. Moreover, domestic demand for silk is far outstripping domestic supply.

A new silk route

The Union government&rsquo;s expenditure reforms programme is set to take an interesting turn. As reported in this newspaper, an official committee, headed by Dr C Rangarajan, set up to reclassify government expenditure for better accounting of outlays has suggested doing away with the distinction between what Budget documents term as &ldquo;plan&rdquo; and &ldquo;non-plan&rdquo; expenditure.

Planning for expenditure

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