The debate on the economic condition of the US has most recently focused on the effectiveness, or lack of it, of the fiscal stimulus package that the Obama administration initiated very early into its term. There is a growing body of opinion that says the $787 billion boost is simply not large enough. Although there has been much talk of green shoots in the past few weeks, as indicators like consumer confidence and housing starts have begun to stabilise, the one persistent source of concern has been unemployment. In June, the economy lost a further 467,000 jobs, less than the 700,000 job losses per month in the first quarter but still symptomatic of severe recession. This raised the unemployment rate to 9.5 per cent, a level not seen since the recession of the early 1980s.

Withering shoots?

Business Standard

The deliberations at different forums at L&rsquo;Aquila in Italy last week have further confounded the vexed issue of combating climate change. Instead of paving the way for a final agreement on emission reductions in the post-Kyoto period, after 2012, the voices emanating from these forums have added new dimensions to the issue which were not under negotiation thus far. What was expected, and also urgently needed, at this stage was to narrow the span of the climate change talks to firming up the country-specific targets of emission reduction for the Annexure-1 countries (for whom these cuts are binding), so that the non-mandatory but desirable action on the part of other countries could also be considered. Instead, the resolutions adopted at the meeting of the G-8 and that of the Major Economies Forum (MEF) have diverted the focus to vague goals based on equally indistinct parameters.

Clouding the climate debate

The finance minister has done well to respond to the criticism that followed his Budget presentation last week, specifically that he had not emphasised economic reforms. Pranab Mukherjee has now clarified that the government does intend to undertake disinvestment in state-owned enterprises during the year. On the second major point of criticism, with regard to the government&rsquo;s large borrowing programme, Mr Mukherjee has told Parliament that he will avoid raising interest rates and crowding out private borrowers; he has also said that he will not monetise this year&rsquo;s large fiscal deficit; the open market operations (OMO) that the Reserve Bank will be expected to undertake, he has said, should not be confused with monetisation.

Mr Mukherjee responds

There is little doubt that the Gujarat government spokesperson is right when he says that deaths due to consuming illicit liquor have taken place in even those states that do not have prohibition. To that extent, he is right in refuting liquor baron Vijay Mallya&rsquo;s assertion that prohibition in Gujarat is the reason behind the &lsquo;hooch&rsquo; deaths in the state. Nevertheless, the spokesperson cannot dispute the common knowledge that, after nearly a half century of official prohibition, liquor is freely available in the state, at a much higher price than elsewhere. And since it is not sold through the normal channels, and therefore necessarily involves the underworld, the liquor could well be of dubious quality as well. To the extent that scores of people have lost their lives after consuming country liquor with dangerous additives (intended to increase their potency), Mr Mallya has chosen to focus on the point where his business interest converges.

The wages of prohibition

Environment regulation regime is set for radical change.

Green energy

It is not a national cap, but where is the equity angle?
News reports have raised the question whether India gave away more than it should have in the discussions on climate change, at the recent meeting in Italy of the G-8 and G-5. It has been said that in agreeing to work towards a cap on how much the temperature of the earth should be allowed to change (2 degrees Celsius), the government has de facto agreed to accept quantifiable limits on India&rsquo;s own emission of greenhouse gases,

The two-degree limit

The government has come up with three explanations for the about-turn that India has done in the meeting between the prime ministers of India and Pakistan at Sharm-el-Sheikh. The first is that there is no about-turn at all.

Betting on Islamabad

Air India's troubled flight

A potential source of pressure on the BoP.

Remittance reversal

One distinct sign of macroeconomic stability is that the frequency of actions by central banks around the world, including the Reserve Bank of India (RBI), has declined considerably. Towards the end of last year, policy rates and reserve ratios were being slashed almost every few days. Now, the pattern has more or less reverted to its schedule, which in the case of the RBI is a quarterly one.

Status quo for RBI

US Secretary of State Hillary Clinton made the usual case for India accepting limits on its carbon emissions &mdash; the bulk of future carbon emissions, she said, would emanate from high-growth developing countries such as India and China and, therefore, the only way to avoid an environmental catastrophe was for them to follow a low-carbon development path. Despite its apparent logic, the argument has a critical flaw, which is that the rich countries have been environmental free riders all along and seek to continue to be free riders. The environment minister Jairam Ramesh did well, therefore, to make it clear that India would not accept any legally binding restrictions. If India is to move its millions from poverty to an acceptable living standard, it has to adopt industrialisation models, which are energy-intensive.

No carbon copies

The success of the Nano and Indian Premier League in Business Standard&rsquo;s latest Brand Derby (reported in the Strategist section yesterday) should drive home three lessons for marketers. One, it is now possible for Indian brands to gain instant global recognition. Two, more than the money spent on promotion, it could be the idea behind a product which matters. And three, a great brand can be created quickly.

Not just marketing

The lackadaisical performance of the south-west monsoon has sent a nervous shiver across the country. The likely emergence of El Nino, the name given to the warming of the Pacific Ocean and which often influences the Indian monsoon adversely, coupled with the failure of the monsoon to gather momentum in the key north-western agricultural belt, has added to the worry. Under the circumstances, the assertion by the India Meteorological Department (IMD) that much of the rain deficit in June will be made up in July (which is mostly over) and August has cut little ice. While some sense an imminent drought, resulting in a poor kharif harvest, the agriculture ministry still hopes that agricultural production will be in the normal range. The finance ministry is worried, as a drought is the last thing it would like to cope with during an economic downturn.

Questions on the monsoon

Hillary Clinton&rsquo;s visit, which concluded on Monday after a flurry of agreements being signed, demonstrated the positives and negatives of the Indo-US engagement in its current avatar. The positives were more in the nature of the softer aspects of the visit, with the US secretary of state meeting businessmen, students and civil society activists; these encounters underlined the values and linkages that bring the two countries together. On the issues which are at the hard edge of diplomacy, what was in evidence most of all were the mine-fields that the two governments have to negotiate.

Soft sell, hard issues

India&rsquo;s information technology leaders have managed to beat analyst and market expectations by turning in a credible performance in the quarter ended June, in challenging times that show no clear signs of getting any easier. While TCS and Infosys hold back from saying that light is visible at the end of the tunnel, Wipro chairman Azim Premji has struck half a note of optimism by declaring that he sees the &ldquo;first signs of stability in the business as ramp downs start to taper off and volumes start to stabilise.&rdquo; What this stability means is that while things were in some kind of a free fall, with technology chiefs in client companies not knowing what budget would be available for the year, now both the industry and clients know where they stand. But there is no upside, as new projects are nowhere in sight. This is reflected in Infosys cutting both its current quarter and full year guidance, and Wipro issuing a virtually flat guidance for the current quarter.

The tough get going

The debate on state support of terrorism in South Asia should get real, even if governments in the region find themselves unable to do so during formal diplomatic encounters. Indeed, Pakistan President Asif Zardari has made so bold as to break with all his country&rsquo;s lies of the past and admit to Pakistan&rsquo;s role in promoting cross-border terrorism. So perhaps it is time to recognise that no country is innocent, and that this has been the case for the last 60 years. If Pakistan has spent much of the last three decades stoking rebellion and secession in first Punjab and then Kashmir, as also in supporting repeated strikes by Pakistani nationals in Delhi, Mumbai and elsewhere, if Bangladesh has been supporting terrorist outfits like the United Front for Liberation of Assam (Ulfa), and if sundry players in the region have been supporting Naga and other rebels, the fact is that India does not have a clean record either.

Anyone with clean hands?

Investors in Singapore have to be either terribly confused or terribly impressed. They&rsquo;ve just been told by Surface Transport Minister Kamal Nath that he plans to increase five-fold the pace of construction of highways in the country, to 20 km a day. Mr Nath, who is currently on a trip to South-East Asia, plans to repeat his message in the US and Europe. To convince them, he has outlined some of his plans. These include setting up of 150 exclusive land acquisition wings, reducing the stranglehold that engineers have on the National Highways Authority of India &mdash; engineers typically over-specify projects, making them non-bankable. The minister gives the example of the Belgaum-Dharwad highway where paring of unnecessary service lanes and flyovers has reduced the cost by 40 per cent, from the original estimate of Rs 480 crore. An expressway authority has also been announced.

Hairpin bend ahead

While the general rate of inflation has displayed a consistent downtrend since November 2008, moving into the negative domain last month, food inflation has defied all attempts to tame it, and is a matter of concern.

The story is food inflation

Without land, big projects will not take off.

Singur reprise

Colleagues may be trying to pull him down a peg.

PM loses ground

The first-quarter (April &ndash; June) results of a sample of 486 companies (four of them in the petroleum sector) that were analysed by the Business Standard Research Bureau provide some indications that the corporate sector has seen off the worst of the slowdown and is getting into recovery mode. There is, of course, a sharp contrast between the performance of the four oil companies and the rest of the sample, and it is from the numbers reported by the larger sub-group that the relief emerges. The 482 companies in this group saw sales increase by 8.9 per cent over the corresponding quarter of last year. This is in nominal terms but, given the low average inflation rate during the quarter, this number fairly represents the growth in physical volumes. By virtue of low inflation, costs grew by a mere 6.2 per cent, which allowed Ebitda to grow by 15.8 per cent and net profits to grow by an impressive 28.3 per cent.

Corporate climb

Incisive columns and editorial comment by top opinion leaders

Page 569 - Editorial Comment