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

Business Standard

The India-Pakistan relationship is not just a challenge for Indian foreign policy. It is intricately linked to the domestic politics of both countries. Diplomats can do little for the relationship if politicians are not ready to mend it. So, one need not get too excited about bilateral meetings between the foreign secretaries, or even foreign ministers, of the two countries. These are mainly photo-ops, and are meant to clear the way for any substantial engagement that the heads of government wish to undertake. The proposed meeting between the foreign secretaries of India and Pakistan is not important in itself, unless it paves the way for a resumption of the stalled bilateral dialogue between the two prime ministers.

Talking to Pakistan

It&rsquo;s not often that one sees an organisation hiring a cricket stadium to showcase its technological prowess. But State Bank of India (SBI) did just that and the presence of India Inc&rsquo;s leading lights at Mumbai&rsquo;s Brabourne Stadium on Sunday evening was an acknowledgement of the coming of age of India&rsquo;s largest bank, albeit a state-owned one. The bank has brought all its 13,000 branches under what is known as core banking solution (CBS), making it one of the largest banks in Asia to have a single CBS platform. But technology is just one chapter in the story of how the elephant has started dancing.

SBI comes of age

What does a central bank do when it wants to appear tough on inflation and yet does not want to slow the economy&rsquo;s growth engine down? It chooses, as the Reserve Bank of India (RBI) did last week, the monetary policy signal that is generally perceived to be least damaging to investor and consumer sentiment. It hiked the cash reserve ratio (CRR), with an intent to suck out Rs 36,000 crore of excess liquidity.

RBI battles inflation

While the human resources development ministry is currently focused on weeding out poor-quality private education providers in the higher education space, a very different picture obtains as far as primary and secondary education is concerned.

Rethinking education

The projection by the international water resources group that India will have a water deficit of as much as 50 per cent by 2030 is a wake-up call for policymakers. As early as in 1999, the National Commission on Integrated Water Resources Development had issued a similar warning, albeit without assigning any numbers, and had called for urgent measures to cope with the emerging crisis. The report of the &ldquo;2030 Water Resources Group&rdquo;, a consortium of private and social sector bodies, forecasts that India&rsquo;s annual water demand in 2030 will be 1,500 cubic km against the likely availability of 744 cubic km. However, the report forecasts that India&rsquo;s annual water input through rainfall will be 3,840 cubic km. In short, double the water needed will be potentially available but would have to be tapped, stored and supplied to bridge the water deficit. The key to the problem, therefore, would be harvesting and management of rainwater.

Bridging water deficit

The saga of 3G spectrum auction carries on endlessly like a longwinded Indian movie with twists and turns that seem to have no other purpose than to keep the audience glued to their seats. The process has already made it difficult for the Union finance minister to raise revenues in time to bridge the Central government&rsquo;s fiscal deficit. It now appears the proposed auction may well happen in the next financial year. This is just as well because revenue considerations should not be the only factor motivating auction of spectrum. Since the 3G auction process first began three years ago, and the auction dates have been missed on several occasions already, any further delay will mean considerable loss of credibility for the government. However, the price paid in terms of this loss of credibility will now have to be weighed against the likelihood that the revenues raised may not be as high as was initially anticipated because of all the delays.

Better late than sorry

The Chief Justice of India (CJI), KG Balakrishnan, has come out firmly against the recommendation of the Law Commission that the Supreme Court (SC) be reorganised into a Constitution bench in Delhi and four regional benches. In this, he seems to be reflecting the predominant opinion in senior legal circles as the Attorney General and also some leading lawyers have voiced similar opinion.

Supreme is unique!

The controversy generated by Bt brinjal, the first genetically modified (GM) food crop, has thrown up several important issues concerning GM crops, the role of regulators and of global corporate interests in agribusiness. These related issues are as important as that pertaining to the safety of GM food.

Bt brinjal in a pickle

Money does not grow on trees, is a favourite proverb of Prime Minister Manmohan Singh. Union Finance Minister Pranab Mukherjee also knows that money does not grow on the moon either, even if his Cabinet colleagues ask for the moon in making their demands for grants. The time for fiscal rectitude and correction is now. If Mr Mukherjee misses this year&rsquo;s opportunity, he will not get another.

Last call for Mr Mukherjee

There is a sad irony in the fact that even as so many Indian politicians are happy to criticise racism in Australia, so few are willing to slam regionalism in India. So, we must applaud the courage of the few who do. From Mukesh Ambani to Rahul Gandhi, several thinking people have criticised the &ldquo;Mumbai for Mumbaikar&rdquo; chauvinism of the Shiv Sena. If these voices had been raised even earlier, the situation may not have come to this pass.

India for Indians?

There is a sense of deja vu about the report of the Kirit Parikh Committee on the pricing of petroleum products. The recommendation to move to market-pricing for petrol and diesel and a formula-based hike for LPG and kerosene has been made before in several reports, including those prepared by C Rangarajan and BK Chaturvedi. If the government does finally implement the Parikh committee recommendations, it will only be picking up the threads from the reformed situation prevalent way back in 2002! The National Democratic Alliance (NDA) government did, in fact, deregulate pricing of petrol and diesel and did manage to keep kerosene subsidies down at 33 per cent and those on LPG at 15 per cent. It is true that in the months prior to the elections, the NDA resorted to political pricing rather than market-based pricing and didn&rsquo;t allow fuel prices to rise.

Oil slick

After getting tough on air pollution, the government is now focusing on noise and water pollution. This must be welcomed. The Central Pollution Control Board (CPCB) has expressed its intention to install noise governors on instruments and equipment that multiply sound to reduce noise pollution. Like the speed governors in vehicles, noise governors embedded in instruments that create noise can help keep the sound level within permissible limits. As a follow-up measure, the CPCB plans to manage the national ambient noise monitoring network being set up by the environment ministry. This infrastructure, meant for noise mapping of the country, is expected to be in place in about five years. Curbing noise pollution has gained urgency with increasing evidence that in densely populated urban areas, noise levels have crossed the 80 decibel (db) threshold level beyond which noise becomes physically hurtful and harmful.

The other pollutants

Bharatiya Janata Party president Nitin Gadkari&rsquo;s initiative to create an organisational framework for reflecting on policy matters, involving chief ministers of party run state governments, is a good idea. India&rsquo;s opposition political parties have for long lived the life of Dr Jekyll, while in government, and Mr Hyde, while in opposition. As Prime Minister Manmohan Singh once famously commented on political doublespeak: don&rsquo;t judge politicians by what they say when in opposition, but by what they do when in government! To an extent it is understandable that an opposition political party needs a slogan to campaign against the government to turn the tide of public opinion towards itself and against the ruling political party. However, with governments increasingly having revolving doors it is not always easy to figure out who is in opposition and who is in office.

Shadow cabinets and consensus

The Indian software and services industry is set to reach its long-cherished goal of $50 billion in exports in the current financial year, thus completing one of the most remarkable journeys ever ventured by a developing country. When a Nasscom-McKinsey study over a decade ago first set the target for 2008, it seemed little more than a distant dream with exports having reached just $2.6 billion in 1998-99. The 15-month delay in reaching the goal notwithstanding, the journey has put India on the global map in a way nothing else has. It has not only boosted national self-confidence and self-esteem, but also stood on its head received notions of India&rsquo;s competitive advantage as a developing country.

A dynamic fifty

The United Progressive Alliance (UPA) government loves committees. Have problem, will deliberate, seems to be the government&rsquo;s motto. So, it is not surprising that the chief ministers&rsquo; conference on price rise ended with yet another committee being appointed, this time on the overhaul of the public distribution system (PDS). This despite the fact that the recent surge in prices had nothing to do with the absence of a universal PDS in India. Nor is it likely that a PDS system would be able to deal with price spurts if the coverage is not universal and the delivery mechanism is weak. Several committees have studied the PDS in the past and tried to reform it and widen its reach. The extant PDS system has problems both on account of its scale and scope, and its efficiency in delivery.

Food prices and PDS

Responding to the widespread feeling that banks do not set their lending rates in a scientific and transparent manner, the Reserve Bank of India is in the last stages of the consultative process to introduce a new system. The proposed system will replace the existing system of benchmark prime lending rates (BPLR) with base rates. The formula for calculating the base rate will take into account the cost of deposits, cost of complying with CRR and SLR requirements, and the need to retain a profit margin. Plus there will be a markup depending on the cost of operation for a particular type of product and premiums for credit risk and tenor of loans. The proposed method is clearly more scientific than the present system for calculating BPLRs. Additionally, sub-BPLR lending for loans below Rs 2 lakh will be stopped. This need not raise rates for small loans as the new base rates are likely to be lower than BPLRs.

BPLR to base rate

By putting an open-ended moratorium on the commercial cultivation of the gene-altered Bt brinjal, environment minister Jairam Ramesh has ended the long-pending uncertainty over this issue. If, despite nine years of testing and safety trials to the satisfaction of the Genetic Engineering Approval Committee (GEAC), some genuine concerns about the safety aspects of transgenic Bt brinjal have still been left unaddressed, they surely need to be addressed before the country&rsquo;s first genetically-modified (GM) food crop is allowed to be cultivated by farmers and consumed by people. To that extent, the environment minister has done well to subject this vegetable, carrying an alien gene, Cry1Ac, borrowed from a common soil bacterium, Bacillus thuringiensis (Bt), to further testing before granting permission for commercial cultivation. After all, in matters such as food, it is better to be safe than sorry.

Bt safe than sorry

It took India&rsquo;s IT-BPO sector just over a decade to grow more than 12 times, from $4 billion in 1998 to a shade under $50 billion in 2009. Admittedly, the target set by the software service providers&rsquo; body Nasscom was off by a year. But given that the period saw two significant global economic recessions, this is no mean achievement. By contrast the outlook for 2020 is almost modest: a mere four-fold growth to $175 billion. No one doubts the industry&rsquo;s ability to hit or even exceed those numbers; the bigger issue to consider is what this will mean for India and whether the policy environment is prepared for it.

Sustaining new white collar jobs

Cold December seems to have been heated up by the sharp rise in the index of industrial production (IIP). The IIP grew at an annual rate of 16.8 per cent during December, which is higher than the previous business cycle peak recorded four years ago. Indeed, this monthly rate is the highest in 15 years, and is partly because of the extremely low base of 12 months ago. The manufacturing sector, which makes up 80 per cent of the IIP grew at a China-type rate of 18.5 per cent. Even if you discount the low-base effect, the trend since April is unmistakable and upward. The IIP growth rate has climbed steadily for several months, and the cumulative growth rate is 9 per cent. Industrial growth might be four times higher this year as compared to last fiscal. This growth is spreading to all sub-sectors, with especially strong in consumer durables (46 per cent) and capital goods (39 per cent). The former was anticipated due to the exceptionally strong showing of the auto sector.

Buoyed up by business

Merger among public sector banks, on the government&rsquo;s agenda ever since reforms began, now seems to be off the priority list. The idea was given a special push in P Chidambaram&rsquo;s 2005 Budget Speech and bank chairmen thereafter picked it up on cue. Equally on cue, bank trade unions vehemently protested and moved those political parties which would give them a hearing. With Mr Chidambaram no longer shepherding the finance ministry, the idea has now lost some of its backers. The last nail seems to have been driven into the coffin of the idea, for the time being at least, by the Reserve Bank of India downgrading its priority and instead declaring financial inclusion to be very important.

Big no longer beautiful

Incisive columns and editorial comment by top opinion leaders

Page 552 - Editorial Comment