Condoleeza Rice was all of 46 years of age, a professor and not a retired official, when the most powerful head of state in the world appointed her as a National Security Advisor (NSA). Ms Rice was chosen because of her impeccable intellectual credentials in the field of strategic policy, apart from her political affiliation to the incumbent President of the United States. India has yet to decide what ought to be the qualifications of its NSA. Thus far, it is the individual in the job who has defined the post, and not the other way round. India&rsquo;s first NSA, Brajesh Mishra, defined the job in his own idiosyncratic way. It was a model that his successor, the late JN Dixit, wanted to follow but that was not to be, for purely political reasons.

What does an NSA do?

Business Standard

One year into his presidency, Barack Obama is faced with the difficult business of changing tack, may be even re-inventing himself. His popularity ratings have plunged, his Democratic party has lost elections in shoo-in states like Massachusetts and New Jersey, not to mention a swing state like Virginia, and his health care plan (so far the cornerstone of his presidency) is in jeopardy. The economic pundits fear a double-dip recession, and his international diplomacy has little to show &mdash; other than reducing anti-American feeling in some quarters. His China visit yielded nothing, the Europeans have given him cold comfort, his Cairo speech has done little to change the Islamic world&rsquo;s view of America, and his Afghan troop &ldquo;surge&rdquo; was badly handled through a simultaneous announcement of a date for starting withdrawal.

Not the change he wanted

Padma, the lotus, blooms and withers from season to season. The national honour in its name has also followed a similar pattern. In some cases the awardees do the award proud, in others the award does the awardee proud. Which means controversy is like a shadow that cannot be shrugged off. Every year there are critics, because every year someone not worthy of the award finds himself honoured by it. This year it is not at all surprising that the Bharatiya Janata Party has criticised the government for awarding a Padma, that too a Padma Bhushan, to hotelier, lobbyist, New York socialite and page-3 personality Sant Singh Chatwal. That Mr Chatwal has been listed in the category &ldquo;public affairs&rdquo; suggests that he may have played some role in lobbying with his political friends in the United States on behalf of India. This is routinely done by various businessmen and busybodies, but most of them do so for pecuniary benefit.

Withering Padma

Rating agencies the world over should be experiencing some existential angst. Over the last decade and more &mdash; from the Asian crisis of 1997 to Enron, WorldCom and the most recent international financial crisis &mdash; they have failed to signal danger and changed their ratings only when overtaken by events. It is, therefore, natural for the Indian regulators to see if adequate systems are in place for Indian credit rating agencies to work and deliver right although they have not malfunctioned during the recent international crisis the way global leaders have, with structured products bearing triple A ratings falling precipitately in value and becoming illiquid. A relook at regulation is needed for two reasons. The Indian credit rating business is now the second biggest in the world and a growing number of Indian regulators are making it obligatory for financial instruments in their area to get mandatorily rated.

Rating the raters

At a time when other countries are cutting down ethanol admixing with vehicular fuel due to tightening supplies of alcohol, India, oddly enough, is doing the reverse. The Union government has forced the states to raise ethanol doping of petrol from 5 per cent to 10 per cent immediately and has set the target of hiking it further to 20 per cent by 2017, least realising that the sugar industry, which produces ethanol from its by-product molasses, will be unable to meet this requirement. In another ill-advised move, the Maharashtra government has reportedly begun offering fiscal sops for setting up distilleries to produce alcohol from grains, disregarding the growing concerns over food security and high food prices. Over a score of licences are said to have already been issued for grain-based distilleries which will be entitled to a government subsidy of Rs 10 for every litre of alcohol produced from foodgrains like jowar, bajra and broken rice.

Failing the dope test

The results season is upon us and the analysis of the results of an early crop of 665 companies is cause for optimism. These companies, it is true, represent only one-fifth of the universe of all those companies that report their quarterly results on a regular basis. The initial numbers also tend to get skewed by an occasional outlier. But the analysis of this early sample by this paper&rsquo;s research bureau is showing some distinct and heartening trends. The good news is that we are seeing improved profitability across sectors like automobiles, auto ancillaries, IT, cement and steel. On average, the operating margins are up from 10.1 per cent a year ago to 14.7 per cent. Of course, Q3 and Q4 last year were terrible, having borne the full fury of the credit crunch. Twelve months ago, it wasn&rsquo;t really demand destruction, but sudden freezing of working capital and postponement of orders that was the problem.

Not quite a bull run

The old saw, &ldquo;Buy on rumour and sell on news&rdquo;, alludes to the stock market&rsquo;s tendency to anticipate events. Investors are driven by earnings expectations, rather than historic records. This is why equity cycles lead the real economy. For example, the Nifty hits its historic high in January 2008, two quarters before the economy lost momentum. It started recovery in March 2009, a quarter or so before the economic cycle bottomed. This lead effect is true for the broader financial economy. Changes in interest rates and liquidity have lagged effects on the real economy but the bond and forex markets respond instantly. Rising liquidity triggers rising price-earnings ratios as bond yields fall. Currency movements, which often reflect rate differentials, also play a role in influencing the perceptions of portfolio investors.

Market in a pincer

Nearly 10,000 MBA applicants will take the second phase (retest) of the Common Admission Test (CAT) 2009 over the next two days (January 30 and 31) after the prestigious examination, which was computerised last year, had to be extended due to technical glitches.

CAT retest from today, 10,000 to appear

Given that excessive risk taking by banks was at the core of the Lehman crisis, it is not surprising that US President Barrack Obama wants to rein in any resurgence of that tendency. President Obama&rsquo;s economic team spent most of last year bailing out banks too big to fail. Some of these banks have now made sky-high profits and will pay hefty bonuses to their executives. That somehow doesn&rsquo;t sound right, since the banks were saved from bankruptcy by taxpayer money. Surely the taxpayers should also share the new bounty.

The Obama-Volcker Act

The disruption in the common admission test for the IIMs, which is being administered online for the first time, does no credit to either the managements of India&rsquo;s premier business schools or the IT firm which has been entrusted with the task of conducting the tests. When the disruption occurred on the first day of the tests staggered over ten days, a spokesman for Prometric, the IT firm responsible, described it as &ldquo;isolated technical issues&rdquo;.

CAT and mouse games

The so-called &lsquo;mischief&rsquo; of an allegedly &lsquo;disgruntled&rsquo; element at the Kaiga Atomic Power Plant (KAPP) could not have occurred at a more inopportune time for the retiring secretary of the Department of Atomic Energy (DAE), Anil Kakodkar. Instead of capping his career with the announcement of the India-Canada civil nuclear cooperation agreement, Dr Kakodkar demits office with the ignominy of the Kaiga incident grabbing the headlines.

The 'mischief' at Kaiga

A 7.9 per cent rate of growth in the gross domestic product (GDP) is respectable under any circumstances. If it comes at a time when large tracts of the developed world are barely out of a recession, and when the previous quarter had clocked just 6.1 per cent, it is nothing short of spectacular. However, caution needs to be exercised in interpreting India&rsquo;s latest quarterly numbers. The government&rsquo;s estimates show growth of 0.9 per cent in agriculture. This might seem counter-intuitive, given the below-par monsoon, but can be explained by a methodological quirk. The drought affected the output of foodgrains, coarse cereals, pulses and oilseeds. However, this decline will get recorded only in the period when this crop is harvested. Thus the impact of the drought will be visible in the current (October-December) quarter&mdash;which would mean that the 7.9 per cent figure may not be sustained.

Sunny side up

To import rice or not? That is the question to which the government does not seem to have a clear-cut answer. Senior ministers have been losing no opportunity to talk about importing rice, citing the monsoon-induced shortfall in production as the reason. Somewhat contrarily, they have also been asserting that the government has enough stock of rice and there is no need for any worry about a supply shortage, but that has not cut much ice as the ministers themselves keep pressing the import button. The empowered group of ministers (EGoM), which was supposed to take a final call on imports, has ended up compounding the confusion. While deciding, at its meeting last week, not to import rice for the present, it kept the option open for subsequent review.

No need for imports

International trade tends to over-react to fluctuations in economic output. During the high-growth phase of 2003-2007, trade grew at a pace twice as fast as global GDP; in the subsequent two years, trade has declined much more rapidly than the global slowdown. The International Monetary Fund expects global GDP to grow by around 1.5 per cent, but global trade will shrink by perhaps 8 to 10 per cent. India&rsquo;s exports too have suffered the same fate. After witnessing growth rates of 20 per cent and more, month after month for several years, the past 12 months have all shown negative numbers. In the current financial year, India will be lucky if it manages to stay in the same place, at the $168 billion worth of goods that were exported last year.

Cushioning the fall

The Reserve Bank of India (RBI) has done quite a lot in recent times to extend the reach of the banking network across the country and to all sections of society. Banks have been prodded to open no-frills accounts, and to appoint &ldquo;business correspondents&rdquo; in areas where the size and volume of transactions are too small to justify a branch. The latest step is the notification that allows banks to appoint the local kirana/medical/fair price shop as a &ldquo;business correspondent&rdquo;. Potential customers can go to these neighbourhood places and operate their bank accounts, typically with a mobile phone interface that works at negligible cost. Typically, a customer would deposit money with the business correspondent who would then send a short message (SMS) to the bank; in some cases, a receipt is issued. The bank, in turn, messages the customer directly.

Making banking mobile

Scientists will differ in their interpretation, and argue about the difference between acute toxicity and chronic toxicity. But anyone visiting Bhopal can see the havoc created among lakhs of people.

Night without end

Barack Obama has fallen into the trap of trying to please all shades of domestic opinion on what his Afghan war strategy should be. He has given his general most of the additional troops that were sought, but also announced a date when US troops will begin to leave the country. He has indicated that more action will be focused on Pakistan, promised that country a more constructive partnership, and also sought a more active role by India in Afghanistan. Everyone can, therefore, see the positives in the presidential package, but they can also see the negatives &mdash; chief among them being the obvious point that the Taliban has been told it just has to wait for a couple of years before making its next big move. Pakistan too is unlikely to cut links with the Taliban, now that it knows the Americans are not staying for very long. Mr Obama, therefore, has ended up undermining his country&rsquo;s position even as he has decided to send in more of his troops.

Surge and withdraw

The findings of a recent survey by EMA Partners might prompt the leaders of India Inc. to congratulate themselves on achieving greater gender equality in the corner office than most other countries have managed. To do so, however, would be unwarranted, and indeed misleading. The executive search firm says its 240-firm survey shows that 11 per cent of large companies in India have women CEOs, compared to just 3 per cent in Fortune 500 companies. Apart from the obvious difference in sample size&mdash;one is half the other, and a larger sample in India might well throw up different results&mdash;it would be incorrect to conclude that India Inc has a thinner glass ceiling than exist in many other countries, the developed ones included. Eleven per cent, after all, is nowhere near 50 per cent.

Women not on top

In defining a new and nuanced stance on India&rsquo;s negotiating position at the Copenhagen Climate Summit, Prime Minister Manmohan Singh may have left some at home dissatisfied but his perspective appears to have been defined by a larger view of how India should deal with global challenges. Building on his fundamental postulates that on global issues India should not be viewed as part of the problem but as part of the solution, a deal-maker rather than a deal-breaker, and that India must proactively engage the global community on such issues, the prime minister has steered the domestic debate away from naysayers without falling into the trap of the capitulationists. The new Indian position articulated in Parliament by the minister of state for environment and forests is a mix of pragmatism and principle.

Right climate for change

In a voluminous 300-page report, a committee on agrarian relations and land reforms, headed by the Union rural development minister, has found fault with practically every aspect of land policy in India, attributing the rise of Naxalism, tribal and agrarian unrest entirely to this. However, despite its composition of a mix of officials, experts and activists, the committee has failed to come up with a workable strategy that would make land available for industrial, infrastructure and mining development while at the same time protect the interests of tribals and the rural poor. The report does suggest that land commissions and land councils at the central and state levels may be set up to demarcate land for different purposes. The critical question, however, of the criteria by which land will be demarcated for non-agricultural purposes is left unaddressed.

Need for land use policy

Even as reports pour in of a softening of food price futures, the spectre of food price inflation haunts households across the country. But to imagine that the inflation genie can be put back into the bottle through legislative fiat is the height of parliamentary fantasy. The Estimates Committee of the Lok Sabha has recommended just that! It wants new legislation to check price rise of essential commodities by capping the profit margins of trade intermediaries. As if the Essential Commodities Act is not enough, it thinks that more laws means better compliance! The worrisome situation on the food price front deserves all the policy attention it can get, but not through new legislation. The price of food items, including staple cereals, pulses, vegetables, fruit and sugar, are all under pressure for a variety of reasons and demand focused administrative action.

Managing food prices

Incisive columns and editorial comment by top opinion leaders

Page 556 - Editorial Comment