The day the Reserve Bank of India (RBI) raised the repo and reverse repo rates by 25 basis points, taking them back to just last March&rsquo;s pre-election level, the Indian Meteorological Department announced that this year&rsquo;s monsoon is likely to be normal. The message from the moneymakers, the rainmakers and the macroeconomic authorities is clear &mdash; yesterday&rsquo;s &ldquo;skewflation&rdquo; will not be allowed to become tomorrow&rsquo;s generalised inflation. The central bank may have surprised all with the timing of its announcement, but the better informed would not have been surprised by the direction of policy. Even though senior RBI officials told the media after the January 28 policy statement was issued that the central bank would not raise rates till its next policy statement in April, the central bank&rsquo;s own statement did not give that assurance.

Message to market

Business Standard

The Chief Minister of Uttar Pradesh, Mayawati Kumari, is not the first person to so brazenly challenge the values that define democratic politics. In publicly accepting cash donations, presented as a garland of currency notes, Ms Mayawati is cocking a snook not just at her political opponents but at the entire political order. Her supporters say Ms Mayawati is doing in full public view what most politicians do behind closed doors! Even so, the spectacle of accepting currency garlands is both distasteful and can amount to a corrupt practice if the cash accepted is not properly accounted for. The Reserve Bank of India has, in fact, taken a dim view of the practice of making garlands with currency notes. Both the income tax department and the central bank should serve notices on Ms Mayawati and her political party and seek an explanation for the funds garnered so far and for the manner in which this was done.

Ms Mayawati's millions

In 2002, after being found guilty of having helped Enron doctor its books, Arthur Andersen folded up and the Big Five accounting firms became the Big Four. Although the verdict on Andersen&rsquo;s role was subsequently reversed by the US Supreme Court, the damage was done and Andersen never returned to business; its businesses, by then, had been bought over by other firms. Contrast this with India, where none of the Big Four &mdash; KPMG, Deloitte Touche Tohmatsu, Ernst &amp; Young and Pricewaterhouse &mdash; have taken any of the flak for faulty audits. When Global Trust Bank (GTB) ran into trouble, the auditors were accused of negligence and professional misconduct since they had certified the accounts as kosher. While the matter was referred to the Institute of Chartered Accountants of India (ICAI) for disciplinary action, the Reserve Bank of India, for a while, advised banks not to take Pricewaterhouse as an auditor.

Audit thyself

The West Bengal government has at last steered through the state Assembly the legislation conferring university status on the 193-year-old Presidency College of Kolkata, thus ending an epic, nearly four-decade battle to secure for it the autonomy it deserves. As the institution is known for its excellence, not just in India but also beyond the country&rsquo;s shores, its travails in seeking to stop being a government college are relevant for the whole country and provide an abject lesson in how not to run higher education.

Presidency University ahead

In India, a Bill with the same provisions as the US health-care reform Bill is unlikely to encounter opposition, except perhaps from some fringe parties. It would seem obvious that a country that spends a sixth of its GDP on health care, and still leaves one-sixth of its people beyond the pale of health insurance, has a health-delivery system that needs fixing &mdash; especially since US health statistics (like life expectancy) compare poorly with most European ones. Yet, the House of Representatives passed the reform Bill by just seven votes after nearly four months of hard lobbying and angry debate. This speaks volumes for the &ldquo;anti-socialist&rdquo; ethos that dominates American thinking, and the partisanship that now dictates US politics.

US health check

Indian Premier League&rsquo;s (IPL&rsquo;s) Commissioner Lalit Modi is right to be exultant after the results of the auctions for the two additional teams for the 2011 season. At Rs 3,235 crore for the Pune and Kochi franchises, the total haul almost equals the Rs 3,330 crore that the IPL netted from selling eight teams in its first season in 2008. These are awesome valuations for a tournament that is just three years old and for auctions that have taken place at the tail-end of an economic slowdown.

Indian Premium League

The words &ldquo;mining&rdquo; and &ldquo;scam&rdquo; seem to be inseparable. Most of these relate to mining of iron ore, although taint to other minerals can&rsquo;t be ruled out. The ingredients of the scam are as follows. The state government grants mining leases to dubious private parties in a non-transparent way, certainly without a public auction. Maybe there are the so-called &ldquo;bedroom&rdquo; auctions. Subsequently, there is very little monitoring of compliance of lease conditions. Enforcement and monitoring officials are bought out, or become compromised. Crony capitalism ensures that this wink-and-nod indulgence cuts across political lines, hence nobody makes a fuss. Add to this cocktail the voracious appetite of pre-Olympics China for iron ore which caused ore spot prices to jump by 500 per cent in the past five years. To top it all, you have ministers entangled in this gold rush. This heady cocktail was bound to lead to unforeseen political explosions.

Mine of worms

While a Kerala government committee has said that the Coca-Cola plant at Plachimada in Palakkad district caused Rs 216 crore of damage to the environment before it shut down in 2004, the company has categorically denied this. It has argued that it was never asked to give evidence before the committee, that there was no scientific evidence and so on &mdash; in other words, as and when the state government decides to levy a fine on the company, the case is sure to head for the courts, perhaps to join the original case involving the very same Coca-Cola plant that is in the Supreme Court. In this case, when the matter went to the Kerala High Court, the single-judge bench ruled in favour of the panchayat which wanted the plant closed since, the panchayat had argued, it was reducing the availability of water and the effluents released by the plant were polluting the nearby areas.

Beyond the fizz

The well-intentioned food security Bill, cleared by the empowered group of ministers (EGoM) and now awaiting Cabinet approval, continues to raise issues that have not been fully resolved. Apart from the fact that it falls short of the Congress party&rsquo;s election promise of guaranteeing nutritional security for the poor, it is still not clear how the government intends to mobilise the food stocks required to implement such a Bill across the country, and ensure that they reach the targeted families. The existing public distribution system (PDS) has been found wanting on many counts, apart from the fact that in parts of the country where it is needed the most, it does not even exist! In its present form, the draft of the Bill seeks to give the poor a right to get 25 kg of rice or wheat every month at Rs 3 a kg.

Delivering food security

Prime Minister Manmohan Singh has done some much-needed plainspeaking on the problems facing the Eleventh Five Year Plan. The biggest hurdle to the Plan realising its objectives is, of course, an external one &mdash; the global economic slowdown. This has imposed a constraint on the ambitious 9 per cent growth target set for the Plan period as a whole (2007-12). The Plan&rsquo;s growth target is unlikely to be realised also because of domestic inadequacies. As Dr Singh has rightly cautioned, &ldquo;the restoration of high growth should not be taken for granted&rdquo;. Apart from the telecommunications sector, where despite the telecom ministry&rsquo;s efforts the sector has done well in terms of growth, in all other infrastructure areas performance is lagging behind Plan potential. Despite high gross savings and investment ratio, poor implementation of projects may be slowing down the growth process.

PM's plainspeaking

Internet content censors (read countries) are rearing their ugly heads again &mdash; sometimes in the garb of protecting their citizens and especially children, and at other times, claiming to protect national interests.

Geopolitics in cyberspace

India Inc has made its biggest foray yet into Africa, with Airtel waiting to sew up its $10.7 bn acquisition of the African assets of Zain Telecom. The deal will ensure the combined entity has 171 million subscribers in 19 countries, and will make it the seventh largest in the world in terms of the subscriber base (in terms of revenues, of course, the combine will be much lower down the pecking order &mdash; Verizon which is the 9th in terms of subscriber has a revenue of $108 bn, as compared to $66 bn for China Mobile, which has the largest subscriber base in the world at 533 mn).

African safari

Once upon a time, long, long ago there was an airline in India that was the cynosure of the global civil aviation industry. Its mascot was a proud but friendly Maharajah, who wore a smile and bent forward, rather than look uppity and self important, and welcomed satisfied passengers aboard. The air hostesses were smart and friendly, the food was good and the world liked travelling on the Maharajah&rsquo;s magic carpet. Then India&rsquo;s new maharajahs and their darbaris came along. The smiling Maharajah was dethroned, derobed and demoralised. The kingdom was lost but the courtiers of the new feudals ruled the roost and had a good time.

Upgrading downgraders

There is more at stake in Greece&rsquo;s decision to approach the International Monetary Fund for help than just Greece&rsquo;s economic stability. The decision of the George Papandreou government in Athens comes after much hand- wringing and soul-searching in Europe over the role that ought to be played by Europe itself in offering a lifeline to Greece. Germany&rsquo;s unwillingness to step in and bail out Greece demonstrates the limitations of the European Union and the managers of the eurozone. German voters are not ready to bail out the Greeks. The other political angle is provided by the undeclared competition for popularity within France between French president Nicholas Sarkozy and the IMF managing director, Dominic Strauss Kahn, a potential Sarkozy rival. Of course, Greece has not yet decided to go to the IMF. It has merely expressed its intention to do so.

Saving Greece

Roads are not just for fast cars. Roads are the lifeline of any economy. They provide connectivity between producers and consumers, between farms, factories and markets, between people and opportunities. The higher the road density of a region, the more developed it will become. All this is from a basic course in simple economics. So it is surprising that some state governments still remain laggards in securing the land required to lay the required roads under the national highways programme. The performance of the National Highways Authority of India&rsquo;s (NHAI) celebrated national highways programme is being stymied by the inability of state governments to make land available for highways construction. The Union minister for road transport and highways, Mr Kamal Nath, says that Bihar, West Bengal, Chhattisgarh, Jharkhand, Uttarakhand and Himachal Pradesh are the worst offenders when it comes to making land available for NHAI projects.

Road to development

The attempt by the European Union (EU) and the US to link international trade with environment protection through some kind of a pollution tax on imports from the countries not obliged to undertake binding emission reductions seems a sinister protectionist move that will be detrimental to both these important causes. While the US House of Representatives has already passed a Bill that allows import taxes on goods from countries that do not have statutory curbs on greenhouse gas emissions, the EU has, on several occasions, considered such a proposal but without a final call on it. The proponents of this concept, led by France, justify it on the plea that it would create a level playing field between polluting developing countries (read India, China and the like) and the developed countries that have accepted emission cuts under the Kyoto protocol on climate change.

Protectionism redux

The easy conclusion that some in the United States may draw from the recent elections in Iraq is that George W Bush&rsquo;s 2003 invasion of that oil-rich country has been justified. The lessons that the country should take away are more complex than that. The fragmented verdict from elections underwritten by American security certainly indicates a healthy emerging plurality that Iraq has lacked for decades. To be sure, the situation is delicately poised among the rival communities for power &mdash; Shia, Sunni and Kurds &mdash; and the options before the Iraqi people scarcely look appetising right now. The rival contenders for prime ministership are neither popular nor have they stood out as beacons of good governance in the past. Ayad Allawi, a former US-backed Sunni prime minister, has emerged with 91 seats against his rival and incumbent Prime Minister Nuri Kamal Al-Maliki&rsquo;s Shi-ite coalition with 89 seats in a 325-seat Council of Representatives.

The real Iraqi freedom

If evidence was needed of how easily defence modernisation is stalled, witness the ongoing Delhi High Court battle between Italian electronics major Selex Systemi Integrati and the Government of India. Selex wants the court to stay the modernisation of 30 defence airfields, most of them in border areas, alleging irregularities in tendering. The airfields languish while the court decides whether the bidding, in which Selex came second by a whisker, was indeed flawed or whether the Italian company (which, significantly, has modernised 75 per cent of China&rsquo;s airfields) is just a bad loser. Others may follow Selex to the courts since the Ministry of Defence (MoD) has indeed sent out the message that allegations of corruption are a quick way to stymie ongoing purchases. This newspaper has drawn attention to the ministry&rsquo;s ill-considered blacklisting of arms companies, both foreign and Indian, on mere suspicion of corruption.

Arms and the man

Five years after the initial public offer (IPO) scam surfaced, the Securities and Exchange Board of India (Sebi) has exonerated the National Securities Depository Ltd (NSDL) for the alleged deficiencies in services that contributed to the scam. The Sebi order defuses an embarrassing situation for NSDL and its former chairman CB Bhave, who is now the Sebi chairman. Given the conflict of interest, Mr Bhave correctly recused himself from the meeting which was chaired by Mohandas Pai of Infosys.

NSDL and the IPO scam

Growth is back, unhindered, almost unaffected by the international slowdown, and well on its way to meeting the 8 per cent target that many believe has become India&rsquo;s long-term growth trend. In its latest estimates of economic performance, the CSO expects growth to be at 7.2 per cent for the year 2009-10, up from 6.7 per cent for 2008-09. In other words, India&rsquo;s GDP grew at close to 7 per cent annually through the worst economic crisis the world has ever seen.

Growth is back...

The latest CSO figures on incomes and investment reveal a conflicting story on investment. While investment (Gross Domestic Capital Formation, or GDCF) shows a slight fall between 2007-08 and 2008-09 in the CSO&rsquo;s figures that take 2004-05 as the base year, it shows a marginal increase when the base year is 1999-2000. Numerical inconsistencies aside, there are certain trends in India&rsquo;s growth story that are highly robust to changes in base years and different data definitions. First, the household sector has been saving and investing greater amounts throughout the slowdown period. Second, its investment in both financial and physical heads has been growing. Third, agriculture investment is once again taking off. Further, quarterly growth trends also reveal a reversal of the falling trend in investment growth. In other words, the first two quarters of 2009-10 have seen investment levels as measured by GDCF go back towards the long-term growth trend.

...and is sustainable

Incisive columns and editorial comment by top opinion leaders

Page 551 - Editorial Comment