Many questions remain to be answered about how the government&rsquo;s recent notification of foreign direct investment (FDI) in retail is to be worked out. Some of these, presumably, will be answered as the new dispensation is put into operation. Others, however, deserve immediate comment.

Not a common market

Business Standard

The United Progressive Alliance appears to be stable and unthreatened even after the Trinamool Congress (TMC) left it in a huff, indicating that the party&rsquo;s brinksmanship will have little immediate national fallout. The question, though, is where it leaves the TMC, its leader, Mamata Banerjee, and the state it rules, West Bengal. The Congress is, after all, the TMC&rsquo;s only natural ally. Membership of a &ldquo;third front&rdquo; grouping is impossible as long as the Left parties remain the backbone of such a concept. Joining the BJP-led National Democratic Alliance is tough, given the near-farcical extent to which the party has gone to capture the votes of West Bengal&rsquo;s muslims. (Remember, the resignations of the TMC&rsquo;s ministers were only to be handed in &ldquo;after Friday prayers&rdquo;.) Its opposition to the Congress&rsquo; reforms, thus, isolates the party completely.

Agitate and rule

The competition between the National Stock Exchange, or NSE, and its rival MCX-SX, which is gearing up to launch equity and debt operations on Diwali, promises to be tough. MCX-SX has embarked on an aggressive membership drive, offering favourable terms for fees, deposits and net worth criteria, including discounts for professionals and members from non-urban areas. The NSE has countered by creating a new Alpha membership class. It has halved its deposit and net worth criteria as well as waived initial membership fees and allowed existing members to convert to Alpha. Though the NSE&rsquo;s deposit and net worth criteria are higher than in the proposed MCX-SX structure, transaction costs will reduce to near-zero for some NSE members. The Bombay Stock Exchange, or BSE, which has the lowest deposit structure, will likely respond similarly, since it cannot afford to be left behind.

Lower costs, more risks

In just over a year, the anti-corruption &ldquo;movement&rdquo; led by Kisan Baburao Hazare and Arvind Kejriwal has lost energy, public support and momentum, finally splitting amid mutual recrimination. It is not that corruption has ceased to be an emotive public issue. Instead, it appears that the very methods of mobilisation that India Against Corruption (IAC) used to gain a vocal and visible following in India&rsquo;s towns practically overnight have shown their limitations. The characteristics of the movement were, first, a disdain for politics while seeking political ends; and, second, a focus on personality and individual probity instead of systemic reform.

Personalities to politics 

As he turns 80, after what must have been two of the most difficult years of his career, a few things suddenly seem to be going right for Prime Minister Manmohan Singh. Thanks to the economic measures that his government announced just less than a fortnight ago, the national conversation has turned away from the problems with coal mine allocations to the private sector, many of which were carried out during the period he held additional charge of the coal ministry.

Signs of coherence 

The government has revealed the nuts and bolts of its much-hyped Rajiv Gandhi Equity Savings Scheme (RGESS), intended to expand the number of first-time investors in the stock market. In these days of liquidity-fuelled euphoria, market participants are prepared to miss the thorns for the rose &mdash; which explains the buzz surrounding the scheme. True, too many Indians avoid investing in equity. The finance ministry told Parliament in May that there are 33.73 million income tax assessees. Numbers from the depositories show there are about 20.45 million demat accounts. After cancelling out the duplicate demat accounts, it would be safe to assume that at least half of India&rsquo;s taxpayers do not invest in equity. That&rsquo;s a big enough rose. But look at the size of some of the thorns. If your annual taxable income is over Rs 10 lakh, then you are not eligible to invest under this scheme. This means a significant, influential section of taxpayers will be out of this scheme.

The thorns and the rose

The restructuring programme for state electricity boards (SEBs) approved by the Cabinet Committee on Economic Affairs (CCEA) this week is necessary, but not sufficient. Most importantly, it will not remove but merely postpone the chances of a crisis caused by Indian states&rsquo; chronic inability to set rational, market-linked prices for power. The immediate cause of the restructuring is the stress on banks.

Link tariffs to costs 

All&rsquo;s well, it is said, that ends well. This applies broadly, but not fully, to this year&rsquo;s monsoon. As it begins to retreat from the northwest, it seems that the total rainfall during the four-month monsoon period (June to September) will be normal, notwithstanding initial hiccups and woefully deficient precipitation in the first half. This has not just dissipated the fear of a major drought like that of 2009, but has also helped refill emptied reservoirs and ponds that irrigate fields and generate hydropower in the post-monsoon period. However, the rains&rsquo; spread in space and time has been highly skewed, upsetting the kharif-sowing schedule due to scarcity of rain in June and July. The belated surge in rainfall has helped, but the ill-effects of delayed planting and early-season moisture stress seem to have endured &mdash; as reflected in the fact that kharif production is expected to be lower than last year&rsquo;s record output.

Seven years in a row

It is now widely acknowledged that the United Progressive Alliance&rsquo;s spurt of movement recently came when it felt it had no choice but to move. But what, precisely, made it feel so cornered? Was it, perhaps, the lost Parliament session? The endless terrible headlines in the press? The alienation of the urban middle class visible in the anti-corruption movement? The prospect of defeat in another round of assembly elections later this year? The answer, of course, is none of the above. No, UPA-II eventually moved perhaps because it was worried about a ratings downgrade. Indeed, the prime minister went so far as to actually quote worries in &ldquo;analysts&rsquo; reports&rdquo; as central to the decision.

Listening to foreigners 

The Reserve Bank of India, in its first-quarter review of monetary policy, kept the benchmark policy rate constant at 8 per cent. The only change it made was to lower the statutory liquidity ratio for banks from 24 to 23 per cent; RBI Governor Duvvuri Subbarao said that he wanted to ensure that &ldquo;liquidity pressures do not constrain the flow of credit to productive sectors of the economy.&rdquo; This is perhaps an odd concern.

Well below trend

Almost half of India went powerless yesterday for several hours. Three regional grids &mdash; supplying electricity to northern, eastern and north-eastern states &mdash; collapsed, resulting in a power outage in more than 20 states that severely disrupted all economic activities, brought to a standstill several essential services and adversely affected the services of over 300 trains including the Metro network. The scale of the disruption was unprecedented. And coming as it did just a day after a similar collapse of the power grid for the northern region, with almost similar consequences, it underlined once again the depressing state of the country&rsquo;s power sector and its poor governance by regulators.

Powerless at noon

An examination of the April-June 2012 quarterly results declared so far (Q1, 2012-13) indicates that rising interest costs continue to retard profit growth. So far, about 824 listed companies operating across about 60 sectors (including conglomerates with diversified and miscellaneous businesses) have released Q1 results. This sample includes many market leaders. Sales hit Rs 618,313 crore, an increase of 17 per cent over the corresponding quarter of June 2011. There is a substantial 21 per cent increase in other income, which may be a sign of some padding of the profit &amp; loss account. Operating profits (Profits Before Depreciation Interest and Tax, or PBDIT) have also increased by 17 per cent. Interest costs have ballooned by over 30 per cent. As a result, net profits are up by just under 10 per cent.

Costs of policy

The mini-reshuffle of the Union Cabinet is disappointing. True, the appointment of P Chidambaram as a full-time finance minister is a relief; the prime minister&rsquo;s month-long stewardship of the ministry did not feature any major new directions or fresh policy initiatives. As home minister, Mr Chidambaram provided a clear direction to policies pertaining to internal security. He is now expected to take firm charge of the government's finances, which are in dire need of prudent management.

All eyes on new FM

Former Tata Steel chief Russi Mody used to say quite often that he knew nothing about steel, but did know how to connect with workers. Mr Mody was among the pioneers of investment in &ldquo;human resource development&rdquo; when such management jargon was Greek to India Inc. But history has been unkind to Mr Mody &mdash; many management writers have since dismissed his style of operation as being suitable only for dinosaurs.

Where are the HR CEOs?

For some years now, the idea of an Indian sovereign wealth fund has been floating around New Delhi. This was just barely understandable as an idea in the distant days before the 2008 financial crisis, when several countries seemed to be making money through canny investments, even in financial companies and stocks. Oil-rich countries like Norway, the UAE, Saudi Arabia and Kuwait have long-standing investment programmes. These funds usually specialise in investments that are meant to ensure that the benefits of oil wealth is not transient. All these funds have assets of close to $500 billion (about Rs 28 lakh crore).

A fund of imprudence

There is a particular pattern to the recent mob assaults on young people &ndash; especially young women &ndash; that are generally being seen as moral policing run wild. The attacks are carried out in areas that are otherwise supposed to be safe &mdash; immediately outside a bar in the centre of town, say, as in Guwahati, or in a private residence, as in the attack on the Mangalore homestay last week.

Immoral policing 

As the Kisan Baburao Hazare-led India Against Corruption ended the fast by its leaders on Friday, it promised a &ldquo;political alternative&rdquo; that would take its demands forward. Even those who have doubts about IAC&rsquo;s leadership or the nature of its demands should welcome what appears to be a change of strategy &mdash; if it is indeed such and not merely a tactical move. A new political force will only strengthen India&rsquo;s democracy; IAC, given the name-recognition of its leaders&rsquo; and the popularity of its core issues, has a head-start that most other political start-ups would envy, although sustaining a political movement with a single-point agenda will pose its own challenges.

IAC's next chapter

Devastating floods in Assam in the beginning of the belated monsoon season and widespread water scarcity in most urban centres in the pre-monsoon summer months are grim pointers to India&rsquo;s mismanagement of its water resources. The flawed strategies pursued so far focused more on exploitation than on its conservation, storage and sustainable use. Going by official estimates, the country receives, on an average, about 4,000 billion cubic metres (BCM) of rainwater annually. However, a sizable part of it is allowed to flow down wastefully to the oceans for want of capacity to impound it in surface ponds or guide it down to the underground water reserves. Even if the country&rsquo;s 84 major reservoirs get filled up to capacity, no more than 154.4 BCM of water can be held in them. Other water bodies, natural or man-made, dotted all over the country, too, cannot hold much water due to a lack of proper maintenance and unchecked siltation.

A national resource

The National Pharmaceutical Pricing Authority, or NPPA, has turned down the request of drug companies to raise insulin prices. Domestic insulin-makers Biocon and Cadila had argued that the cost of production and packaging had become higher, and multinational corporation Eli Lilly wanted the depreciation in the rupee vis-&agrave;-vis the dollar to be factored into the price.

A pharma pricing web

The long 2G saga may be nearing a conclusion with the announcement of spectrum auction terms. Operators will bid for 5 MHz in each circle, with a reserve price of Rs 2,800 crore per MHz for GSM spectrum in the 1800-MHz band (that is, a base price of Rs 14,000 crore), and Rs 3,640 crore per MHz for CDMA spectrum in the 800-MHz band (Rs 18,200 crore). Only 13.75 MHz of spectrum per bandwidth per circle is to be auctioned in this round, implying allocation of no more than two or three licences.

The 2G tightrope

Last week New Delhi Television (NDTV) filed a suit in New York against Nielsen Holdings and its affiliate companies for over $1.3 billion in damages. The law suit claimed that the global research firm had fudged television viewership data. Its contention: Nielsen&rsquo;s refusal to invest in its Indian arm, TAM Media Research, and the corruption that led to manipulation of viewership data in favour of some television channels had caused a loss of revenue for NDTV. The lawsuit brings out into the open what the industry has discussed and dismissed for years &mdash; that the sample size for the ratings measurement is very small and that the process lends itself to corruption. It also emphatically reveals that the Rs 33,000-crore Indian television industry has not been proactive on issues that matter for its long-term health. One such is the ratings system; a TV rating is a time-weighted average of the total time that people in sample homes spend watching a certain show.

Hating ratings

Incisive columns and editorial comment by top opinion leaders

Page 613 - Editorial Comment