Whatever the Collegium of Supreme Court judges decides on the Karnataka High Court Chief Justice PD Dinakaran case, it is unlikely that it will be the end of the matter. If it decides against his elevation to the Supreme Court, it will be accepting the validity of the allegations against him and this will throw up the obvious question as to how he became the Chief Justice of the Karnataka High Court in the first place and what, if any, is the mechanism to check corruption in the higher judiciary. If however the Collegium dismisses the allegations as untrue, it will have to face wrath of a bar association that includes some of the most respected lawyers in the country, who are convinced the allegations have a basis in fact. This is not the first time the judiciary has been put in the dock.

Judges, judge thyselves

Business Standard

The complex Bharti-MTN deal has hit a big roadblock, with the stock market regulator mandating that an open offer would be required if more than 15 per cent of another company&rsquo;s equity were being acquired even in the form of GDRs and/or ADRs. Till the Securities and Exchange Board of India&rsquo;s belated ruling, the generally held view in the stock market fraternity was that Bharti-MTN would get around the mandatory 20 per cent open offer requirement, since the transaction would take place using GDRs/ADRs (which have no voting rights, and therefore there is no question of any control being acquired). Sebi&rsquo;s order has, therefore, come as a surprise, and could be questioned on grounds of logic. The need for an open offer for 20 per cent of Bharti&rsquo;s shares by MTN will mean the need for another long, hard look at the deal&rsquo;s financials.

Too much static

The Cabinet&rsquo;s decision to extend by a year the stock limits and other controls on the private trade in rice, pulses, edible oils and sugar, perpetuates a regime that has proved ineffectual in reining in food inflation. Restraints on the commodity trade have been in place since August 2006, when the enforcement of an earlier notification of February 2002 that allowed licence- and controls-free trading was held in abeyance. Futures trading in several items of mass consumption has also been suspended though, in cases like wheat, also reintroduced. None of these measures has checked the rise in food prices. While general inflation has disappeared after peaking in 2008, double-digit food price inflation has continued.

Counter-productive controls

Ford unveils the small car that it will make in India from next year; Renault announces fresh Indian plans, adding Nissan as a partner after having already selected Bajaj for a joint venture; Volkswagen in turn will introduce its small car next year. By all accounts, the car industry in India is about to acquire serious scale, as new car plants start dotting the maps of Maharashtra, Tamil Nadu, Haryana, Gujarat and Uttaranchal.

A small-car hub

The reconstitution of the National Tiger Conservation Authority (NTCA) earlier this month, within three years of its being set up, suggests that the government is unsure of how to fulfil this mandate. Actually, the solutions exist, and have been demonstrated on the ground; they need replication. For although there are no firm estimates of how far the tiger population has diminished since Project Tiger began in 1972 &mdash; the &ldquo;pug mark&rdquo; census method used then has been widely discredited &mdash; it is easy to see that tigers are disappearing from India&rsquo;s jungles. Conserving the approximately 1,650-odd Royal Bengal tigers that India now has is essentially a question of institutional reform.

Protecting the tiger

Transparency International, the Berlin-based organisation, ranks India as one of the more corrupt countries in the world&mdash;a conclusion based on surveys of business people. You wouldn&rsquo;t think that is the case, if you go by what the Central Vigilance Commission (CVC) is doing. In its latest report, the CVC has put on its website a list of 123 government officials against whom it has advised either penalties or prosecution for corruption. Just 123 officials are corrupt&mdash;in a country that ranks among the more corrupt economies in the world? One explanation is that this is the list for just July; if you add the list for previous months, the number becomes less laughable. Major penalties, for instance, have been imposed on 385 officers during the year and the CVC has advised that this be done to 778 officials. But even so, the numbers don&rsquo;t square with the reality that everyone is familiar with.

Just 123 corrupt officials?

With just three meetings, the Group of 20 countries that accounts for 85 per cent of world GDP and two-thirds of the global population has emerged as the main forum for discussing international economic issues. Born out of the crisis of the Great Recession, the G-20 is less than a year old but has managed to dispel the initial scepticism about what it might achieve, and notched up some important successes, including some at last week&rsquo;s Pittsburgh summit. Since every crisis is an opportunity that should not be wasted, it is entirely to the good that the Great Recession has been used to push aside the increasingly inadequate G-8, and to replace it with the G-20. A look at the results of the latest meeting will make this clear.

The G-20 arrives

When specialists quarrel, laymen are often left clueless as to who is talking sense. In the belated controversy about whether India&rsquo;s testing of a fusion (hydrogen) bomb in 1998 was a success or failure, one former nuclear expert from the Defence Research and Development Organisation (DRDO) is ranged against virtually the entire atomic energy establishment. If one applies common sense, though, it would seem that K Santhanam of the DRDO has scored the goals so far. He has asserted that a failure report on the fusion bomb was filed in 1998 itself, within months of the test being conducted&mdash;a fact that can easily be verified. He has argued that the usual peer review by independent experts has not been done, to verify the claims of those in office who conducted the test&mdash;again something that can be verified.

What if?

The Kargil review committee went into the failure to share intelligence, seen as one of the causes of the Kashmir war, and recommended corrective action. The government then decided to set up a Multi-Agency Centre (Mac) to coordinate and share intelligence available with the different agencies, including the Intelligence Bureau, the Research and Analysis Wing and Military Intelligence. It was also decided that a National Intelligence Grid (Nig) would be set up at a subsequent stage. Nothing happened for many years, until the Mumbai attack of last year, which was seen as having resulted from yet another failure of intelligence coordination. A new home minister took charge, and soon there was action.

Needed: a privacy law

The Swiss banks&rsquo; proposal to levy a withholding tax on the income generated from assets of Indian nationals and held in Swiss banks, is not worth treating seriously. The idea is that Swiss banks will levy the tax without disclosing the names of people paying the tax, and hand over the tax to the Indian government. The offer by Urs P Roth, CEO of the Swiss Bankers Association, has been made against the backdrop of talks with Switzerland on a new tax treaty, and is therefore an attempt by Swiss banks to avoid giving details of Indians holding their wealth in Swiss banks (pace the UBS capitulation before US tax authorities). Among the problems with the proposal, the concept of a tax on interest income is nebulous since Swiss banks are not known for paying generous interest rates on deposits. Also, since the proposed tax would imply the fulfilment of a tax obligation, the legal implications need to be examined. If the implication is an amnesty, the offer loses all meaning.

Swiss challenge

The government&rsquo;s proposal to bring a Bill during the winter session of Parliament to protect the interests of home buyers is to be greatly welcomed. Most home buyers invest the largest share of their life savings in a home, and till now have suffered from asymmetry of information vis-&agrave;-vis the builder or seller. As a result, the typical home buyer has had little scope for ensuring that he gets what he has contracted for, and compensation for non-delivery. On the other hand, it is necessary to ensure that regulation is not excessive, and leaves builders with the freedom to do their business without being harassed by officialdom.

Protecting home buyers

The proposal to lease six sick state-owned fertiliser units, as an alternative to an outright sale, is a potentially workable idea. Though the 90-year lease that is planned makes it a virtual sale, and should therefore be shortened to no more than 20 or 30 years, a lease will be more acceptable politically. The substantive advantage is that a lease, as opposed to an outright sale, opens up the project to smaller companies as well, and this would include companies/entrepreneurs who are confident of their ability to turn around these sick companies but do not have the money to offer upfront. India&rsquo;s telecom revolution, for instance, almost died still-born when the bidding process involved stiff annual fees but blossomed once the government moved to a more sensible revenue-share licence fee structure &mdash; this allowed a little-known firm like Bharti to take off and become the country&rsquo;s top telecom service provider.

The lease option

Arvind Subramanian made an important point when he wrote on this page last week that India had lost the &ldquo;narrative&rdquo; on the climate change issue. As Mr Subramanian pointed out, the worst offenders, when it comes to the emission of greenhouse gases, have adopted a holier-than-thou posture, and have managed to paint India as the villain of the piece&mdash;the country that is standing in the way of a global compact on dealing with the climate change issue. That such an absurd &ldquo;narrative&rdquo;, which has nothing to do with the reality, can gain currency in many circles should be considered a failure of Indian economic/environmental diplomacy. It is also a case of undisguised duplicity on the part of the developed nations, and it is just as well that Mr Ramesh took on Hillary Clinton during her India visit, and more recently Nicholas Stern, author of the Stern report in Britain.

Regaining the narrative

After getting it wrong initially, and offering to fly more Air India flights on the day the private sector airlines threatened a strike, the aviation ministry is now talking tough. IndiGo has quickly said it will operate its scheduled flights, and others too may see the light. The airline owners, backpedalling furiously because they realise that they have overstepped the line, say now that they did not want to threaten the government or blackmail passengers; all they wanted to do was highlight their problems&mdash;high aviation turbine fuel prices and high airport charges.

Wrong course, captains

Reserve Bank Governor Duvvuri Subbarao has kept his counsel these past 10 months, even as he has gone about his quarterly policy reviews, and some ad hoc announcements in between. Perhaps his first serious assay to address contemporary questions in monetary management was at the JRD Tata lecture organised by Assocham last week. Dr Subbarao dwelt on global as well as domestic issues, and his remarks are worth notice. Most importantly, he has come out firmly against inflation targeting as a single-point monetary objective (as recommended by, among others, the Percy Mistry committee). Instead, he favours the multiple-objectives approach that has defined RBI actions for at least the last dozen years, on the basis of well-founded reasoning that he has spelt out. For instance, inflation in India is not always a monetary phenomenon, especially when it comes to food items.

Monetary policy challenges

The external trade data for June, published by the ministry of commerce and industry yesterday, indicate that the bleak state of affairs continues. Since October 2008, exports have been declining in dollar value terms, though some of the impact on rupee realisations by exporters was mitigated by the significant depreciation of the rupee. With the revival of portfolio investment inflows, the exchange rate has changed direction, so even that source of relief is now no longer available. In June 2009, exports in dollar terms declined by 27.7 per cent over June 2008, to $12.8 billion. The decline in rupee terms was only slightly less steep, at 19.4 per cent. The one small saving grace in this is that the June decline is slightly smaller than that for the April-June quarter, which was 31.3 per cent in dollar terms and 19.6 per cent in rupee terms. The bottom line is that, even as the rest of the economy is showing some signs of revival, exports continue to plunge.

Continuing decline

With the mobile phone industry adding 10 million new subscribers each month, and a severe spectrum crunch having resulted, it is not surprising that the government is confident of getting big money when it auctions the 3G/Broadband Wireless Access (BWA) spectrum; it increased the estimate for this from Rs 20,000 crore in the Interim Budget to Rs 35,000 crore in the latest Budget. And since there was a difference of opinion between the finance and communications ministries on what the minimum reserve price for the 3G auction should be (finance wanted double the Rs 2,020 crore that communications wanted), the Prime Minister has been quick to set up a Group of Ministers to decide on the issue. The GoM will also decide on issues like the number of slots that are to be offered, the annual revenue-share licence fees, and so on.

Regulatory pitfalls again

The performance of the monsoon in the first half of its four-month run is dismaying, though there are a few redeeming aspects. The cumulative rainfall in the country between June 1 and July-end is reckoned to be 19 per cent below normal. Deficiency of this order, if sustained during the rest of the season, would be equivalent to that in 2002 and 1987, the two worst drought years in recent history.

Dry at the mid-point

Given the government&rsquo;s affidavit in the Supreme Court and the manner in which the finance and law ministers have rallied around him, it is not surprising that Petroleum Minister Murli Deora has said nothing new in his reply to Anil Ambani&rsquo;s public charge that he was helping Mukesh Ambani&rsquo;s Reliance Industries Limited (RIL) to renege on its gas deal with Anil Ambani&rsquo;s Reliance Natural Resources Limited (RNRL). Even so, the blandness of the response has been noteworthy.

Move Mr Deora

The advance estimates for US GDP during the second quarter of 2009 (April-June) point to a distinct improvement in overall growth performance. The economy declined by a seasonally adjusted, annualised rate of 1 per cent. This was better than the consensus forecast of minus 1.5 per cent and a significant improvement over the minus 6.4 per cent recorded during the previous quarter.

Beginnings of a recovery

The Securities and Exchange Board of India (Sebi) has made it cheaper for investors to park their savings in mutual funds; with no entry loads, investors will receive units for the entire amount they plan to invest. Distributors, who so far have received the 2.25 per cent load as a commission from the asset management company, will now have to do without this.

No front-loading

Incisive columns and editorial comment by top opinion leaders

Page 565 - Editorial Comment