In spite of targeting a 120-basis-point reduction in the Centre&rsquo;s deficit for 2010-11 to 5.5 per cent of the gross domestic product (GDP), Finance Minister Pranab Mukherjee&rsquo;s Budget in February was notable for one rather optimistic assumption: that the oil subsidy during the current year would be no more than Rs 3,000 crore. Just a month-and-a-half into the fiscal year, the issue has become rather more pressing, although the unexpectedly ambitious bids in the 3G auctions are likely to create an impression that the government&rsquo;s fiscal worries are over, since the extra take on this account alone could be Rs 35,000 crore, or half a percentage point of GDP. However, the negative side more than outweighs this one-time gift, because oil prices have stayed high, and this will come to haunt the Budget&rsquo;s price assumptions.

Fisc slips on oil

Business Standard

An ordinance was promulgated last week that empowers the government to dissolve the Medical Council of India (MCI). As a first step, the government has now created a seven-member board that will take over the functioning of the MCI. The ordinance will be effective for a year during which time the government is likely (if reports are to be believed) to dissolve the MCI. It intends then to separate the two functions of the MCI &mdash; education and licensing &mdash; and hand them over to new institutions. Education will come under the ambit of the National Commission for Higher Education and Research (NCHER), which, in turn, will be overseen by the Ministry of Human Resource Development (MHRD), and the licensing of medical practitioners under the National Council for Human Resources in Health (NCHRH), to be overseen by the Ministry of Health and Family Welfare.

Improve, don't abandon, MCI

Completing the Doha Development Round of multilateral trade negotiations can boost global growth and new trade opportunities would constitute a stimulus package of up to $300 billion, Mr Pascal Lamy, the director general of the World Trade Organisation (WTO), claimed this week. This is incentive enough, especially for countries experiencing a slowdown in economic growth and worried about double-dip recession. Speaking at the Bahrain Global Forum, of the International Institute of Strategic Studies, Mr Lamy made a reasonable claim for the WTO and the multilateral trade regime which, he said, had ensured there was no slide into protectionism in the face of the Great Recession. International trade is today as open as it was at the beginning of the crisis, Mr Lamy claimed. After a 12 per cent fall in real terms, in 2009, world trade is expected to grow by 9.5 per cent this year. This is reassuring. Keeping the wheels of trade moving has helped. But, the global economy has to move forward.

Doha round and round

The government&rsquo;s move to enact legislation for ensuring safety of dams seems well-intentioned, even if the states may view it as central intervention in their constitutional domain. The need for a central law has been repeatedly voiced since 1987 by the National Committee on Dam Safety on which the state governments and others involved in dam management are also represented. This has been reiterated also by the parliamentary standing committee on water resources in its report tabled in Parliament in the recently concluded Budget session. India has hundreds of dams &mdash; 4,711 to be precise, according to the National Register of Large Dams. About 390 more dams are under construction. Most of these dams have already crossed their stipulated life span, being more than 50 years old. Over 100 of them are, in fact, more than a century old.

Damn safety

Mukesh Ambani may have a stake in asserting that oil prices may go beyond $100 a barrel and that India should get used to living with high oil prices, but he is right. India should not be lulled into complacency by the recent decline in oil prices. Prices are likely to remain not just high but volatile too. The continued unravelling of the Greek crisis, with the future and effectiveness of the European rescue operation still not clear, has currently brought oil down to near $70 from the high eighties just a few weeks ago. It is realistic to assume that oil prices will bounce back as soon as there are unambiguous signs of a global recovery. This, in fact, captures the current dilemma. Oil prices will quickly go up as soon as there is confidence that the Great Recession is over but this rise will equally quickly put a question mark over the chances of the recovery being sustainable.

The oil dilemma

A low growth rate, a low savings and investment rate, a high inflation rate and high external debt ratios are only some of the obvious indicators of a failing system in Pakistan. Yet, the International Monetary Fund (IMF) has poured another $1.13 billion into a black hole called Pakistan, hoping against hope that the money will be put to good use and repaid with interest! It is not as if the IMF does not know how bad the situation is in Pakistan given that the Fund team was not willing to go to Islamabad for the negotiations and insisted on meeting Pakistan finance ministry officials in Dubai! What is ironic, however, is that on the one hand the US government approves a bailout package to a government that is hardly delivering on its promises on fighting terrorism, and on the other, the US Senate adopts unanimously a resolution that says America will not underwrite Europe&rsquo;s profligacy.

Dysfunctional borrowers

The slump in the residential property market saw established Indian property developers turning to affordable housing, prompting immediate buyer interest. Thereafter, traditional buyers who had withdrawn first started returning to the luxury end of the market. This created a novel phenomenon &mdash; a market with a bottom and top but no middle, the Rs 30-75 lakh segment.

Revive affordable housing

The US commerce department&rsquo;s decision to continue with the anti-dumping duty on shrimp imports from India may mar prospects of boosting shipments to that country, but it need not be viewed as a major setback for the country&rsquo;s fisheries export sector. The decision follows the mandatory sunset review of anti-dumping duty after five years of its imposition in 2005. It is, however, yet to be ratified by the US International Trade Commission, which may or may not do so, depending on the true merits of the case. Besides, India also has the option of taking it to the World Trade Organisation (WTO). Nevertheless, the reality is that whatever damage the US move could cause to the Indian aquaculture export sector has already been caused in the past five years. Shrimp exports to the US fell sharply and, more significantly, the number of exporters dropped to 75 from around 200 earlier. What is really at stake today is the reversal, if any, of that damage which may not happen now.

Fishy subsidies

India has long lived in a difficult neighbourhood, but time was when things seemed to be getting better the farther you travelled from it, especially eastwards. But the instability in Iran and Iraq, on the one side, in Tibet and Xinjiang, on the other, and in Myanmar and now Thailand on the third, shows that one has to travel a long distance from New Delhi before arriving at a place of peace and plenty. Thailand was one of south-east Asia&rsquo;s growth miracles. For the first three decades of the second half of the last century Buddhist Thailand&rsquo;s economy grew no faster than &lsquo;Hindu&rsquo; India&rsquo;s! But just when India moved up from its infamous 3.5 per cent per annum GDP growth to 5 per cent, Thailand moved from its long-term 4 per cent to a whopping 8 per cent. The so called &lsquo;boom years&rsquo; of 1986-97 were notorious for Bangkok&rsquo;s traffic jams and road-building stories.

The Thai red curry

In 2004, the United Progressive Alliance (UPA) was a coalition born out of necessity rather than intent, aimed at seizing an opportunity rather than pursue an agenda. Quite unexpectedly, the Indian National Congress led by Sonia Gandhi found itself capable of forming a government provided it could stitch together a coalition. The verdict of 2004 was sufficiently anti-incumbent, as in 1996, and so the ruling National Democratic Alliance conceded defeat. The Left Front was willing to make common cause with its main rival, the Congress party (since it is the Congress and not the Bharatiya Janata Party that the Left has to defeat in Kerala and West Bengal) on the basis of a hurriedly drafted, ill-considered National Common Minimum Programme (NCMP). A new, left-of-centre government was born.

A coalition of rights

There are two sets of interests who see the same glass as half full and half empty as a result of Piramal Healthcare selling its main business of domestic formulations to pharma major Abbott Laboratories. Piramal Healthcare chairman Ajay Piramal has said that one of the reasons behind the sale is the company not having the potential to grow overseas.

Half full, half empty

The air crash in Mangalore has been the occasion for the media to resurrect dire warnings about the parlous state of aviation safety in India. It is probably right to do so, given the growing crowds in the aviation space and the number of near-misses reported during take-offs and landings. But a quick look at the facts suggests that the criticism may be overdone. Air travel in India has, in fact, become safer, though, as the Mangalore tragedy showed, not safe enough. Consider these numbers. Between 1978 and 1988, there were three air disasters in India in which 354 people died, the worst of which was that of the Dubai-bound Kanishka, which crashed into the Arabian Sea soon after take-off, killing all 213 on board. The 90&rsquo;s &mdash; when air travel in India was liberalised to allow private airlines &mdash; was a particularly bad decade in terms of air accidents. There were four of them, killing 565 people.

Flight to safety

The most important message coming out of Prime Minister Manmohan Singh&rsquo;s 80-minute national press conference was his declaration that he was in no hurry to retire. Of course he did add, as any loyal member of a political party would, that it was finally up to the Congress party (read party President Sonia Gandhi) to decide.

Manmohan's decade

Indians love happy families, even if fraternal rivalry is the stuff of popular epics, and the image of a loving mother bringing quarrelling brothers together is a sure shot tear-jerker. So, it is not surprising that the stock market reacted positively to the Sunday truce between the Ambani brothers, Mukesh and Anil.

Competitive rivalry

The need for Indian information technology (IT) services to keep going up the value chain is being increasingly met by engineering services, which is responding to the trend in global engineering R&amp;D operations to offshore more and more of their work. The worlds of engineering R&amp;D and information technology began overlapping ever since hardware began to be designed on computers. Over time, as the number of embedded electronics systems in machines has risen, machines have become increasingly &ldquo;intelligent&rdquo;. Today, a good part of the value in a car is accounted for by its electronics. Through all this, offshoring of engineering R&amp;D has become mainstream and offered a new high-value area of work for IT operations in India.

Engineering for others

Reactions to the J Craig Venter Institute&rsquo;s (JCVI&rsquo;s) latest achievement in programming synthetic life make it clear that there are many prevailing misconceptions about what exactly JCVI has done. First and foremost, Venter did not program life in the sense of animating non-living organisms. The demonstration is a major advance on gene-splicing techniques. It does unravel some of the mysteries involved in the creation of life but it doesn&rsquo;t create life itself. It is closer to the truth to call it re-engineering. JCVI took genes from bacteria. These were decoded and re-combined to create a new genome in a computer-determined sequence. The synthetic sequence was plugged into living bacterial cells, which had the original DNA removed. New cells reproduced according to the synthetic DNA, thus creating a new strain of bacteria, which does not exist in nature. This demonstrates JCVI&rsquo;s technique works at bacterial level.

The genome genie

Last week marked an important milestone for banking and financial regulation in the US. The Obama administration has undertaken possibly the most drastic overhaul of the financial regulatory legislation since the Great Depression of 1930&rsquo;s. Two somewhat dissimilar versions of the Restoring American Stability Act were passed by the House and Senate this past week, and will soon become the new law after reconciliation. A new and comprehensive re-regulation of finance has been anticipated ever since the day Lehman fell and caused an avalanche of financial failures. The existing law as well as the quality of regulation was found wanting, and hence the need to revamp the regulatory framework. The large fiscal response to the crisis was unprecedented, bipartisan and immediate, and hence the reform Bill was expected to be swift and harsh.

Diluted Volcker rules

The Union government&rsquo;s plan to promote greater partnership of tribal communities and other local communities in joint forest management is a welcome move that could be a game-changer in Naxalite-affected areas. Alienation of tribal communities, especially from common forest property resources, has been an important factor pushing tribals into the arms of extremist Maoist groups. It is, therefore, no coincidence that Maoist activity is most pronounced in tribal areas. Though in many of the Naxalite-affected areas forest management is even today in the hands of joint forest management (JFM) committees, in reality there is a total disconnect between the tribals subsisting on forest produce and the forest department staff, who virtually control these committees. In fact, both view each other with suspicion due to a lack of trust.

People's resources

As any individual or company that has tried to buy property, especially in rural India, will tell you, this is a proposition fraught with all manner of risk. Land records aren&rsquo;t computerised everywhere and, even where they are, they&rsquo;re not necessarily up to date; in other cases, to save on stamp duties, a very high proportion of sales are conducted on power of attorneys that are not necessarily registered with the authorities. As a result, when you buy property, the principle of caveat emptor applies very strongly since you don&rsquo;t know when the next &ldquo;owner&rdquo; will show up. Given the high share of construction in the country&rsquo;s GDP, it is obvious anything that eases buying of property will increase economic activity and create more jobs. Which is why, several years ago, consultants McKinsey &amp; Co had estimated land titling reforms would raise India&rsquo;s GDP by 1-2 per cent.

Landing an opportunity

The higher echelons of India&rsquo;s civil services are distressed by the Union Cabinet&rsquo;s decision to amend civil service rules to give yet another extension to the incumbent Union Cabinet Secretary K M Chandrashekhar. This is not because anyone questions the competence and performance of Mr Chandrashekhar. Indeed, there is universal appreciation for his quiet competence and his impeccable track record as a distinguished civil servant and economic policy-maker, and trade negotiator. However, the prime minister&rsquo;s decision to overlook the claims of several contenders and seek amendment of government rules to secure an extension for the incumbent has not gone down well with senior civil servants. What was the reason for the prime minister to have taken this decision? Using seniority alone as the criterion would have meant giving a two-year term to an officer on the verge of retirement.

Dump seniority principle

New Delhi has done well to declare its intention to play a proactive role at the forthcoming Convention on Biological Diversity (CBD) at Nagoya (Japan) in October for thrashing out a legally binding pact on access to and benefit-sharing of biological resources. Being one of the world&rsquo;s 12 mega biodiversity centres, India has substantial stakes in both preserving the biodiversity and capitalising on its commercial potential. Though the CBD, signed under the aegis of the United Nations in 1992, provides for equitable sharing of benefits from the use of genetic resources and related knowledge, there are no legally binding rules to enforce these provisions. The Bonn convention, adopted by the Conference of the Parties (COP) to the CBD in 2002, lays down guidelines on access to genetic resources and fair and equitable sharing of benefits but these are not mandatory rules and remain only on paper.

Legally bound

Incisive columns and editorial comment by top opinion leaders

Page 546 - Editorial Comment