Are several senior ministers stepping down? In an echo of the Kamaraj Plan of 1963, are they choosing to leave a moribund government for an all-powerful party? Are those out of favour being forced out by a newly assertive prime minister or an angry Congress president? In the absence of any real developments, the answers to all these questions are a mixture of rumour and conjecture, not the stuff of news.

Reshuffle hints

Business Standard

To many who remember the politics of the late 1980s, this is a worryingly familiar moment for India. The two periods have several common features: a rudderless government, an insurgent anti-corruption movement, and weakness on the external economic front. The sudden recurrence in the national conversation of the totemic issue of those times, the quarter-century-old Bofors kickback scandal, is thus almost fortuitous.

The shadow of the guns

Philosopher George Santayana&rsquo;s prediction that those who forget history are condemned to repeat it is coming eerily true in the jungles of east and central India, where state governments have encouraged Maoist terror by succumbing to serial hostage deals. The kidnapping of Sukma district collector Alex Paul Menon in Chhattisgarh last weekend came just days after the Maoists in Odisha released an Italian tour operator in return for the handing over of 27 imprisoned members of their group. Odisha legislator and Biju Janata Dal leader Jhina Hikaka, meanwhile, was released on Wednesday after an extended captivity &mdash; one that did not seem to have caused various state governments to draw the obvious lesson of urgently tightening security measures. The Maoist groups in neighbouring Chhattisgarh were quick to read the message from this softening of the state; they are now holding Mr Menon in anticipation of more prisoner releases.

Hostage to blackmail

It is good to know that the leadership of the United Progressive Alliance thinks so highly of the honour of sitting in the Upper House of Parliament that it imagines it as broadly equivalent to a Bharat Ratna. Or at least, that is what observers might conclude, given that it appears the government has chosen to answer a long-standing demand from India&rsquo;s more vocal cricket fans that Sachin Tendulkar be given the country&rsquo;s highest civilian honour by nominating him to the Rajya Sabha. Certainly, there don&rsquo;t seem to be many other reasons for the nomination. Unless, that is, the government has decided to aid the transition in India&rsquo;s cricket team by suggesting subtly to Mr Tendulkar that he retire from international cricket in order to serve his country better.

Little Master, MP 

India&rsquo;s export-oriented information technology (IT) services industry is so strongly coupled with the global economy in general and developed economies in particular that it has come to faithfully reflect global ups and downs. But the swings have been staggered and modulated by the need for firms in developed economies to beat recession with productivity gains, resulting in a continued pipeline of orders for Indian IT.

The volatility of IT

After adverse predictions regarding this year&rsquo;s monsoon by some global weather agencies, the forecast of normal rainfall by the India Meteorological Department (IMD) seems to have come as a relief for a government combating high food inflation. The IMD projects total rainfall in the June-September monsoon season as being 99 per cent of the long-period average.

Fearing El Nino

The permission granted by the Forward Markets Commission (FMC) to co-operative societies to trade on the commodity exchanges is a welcome move &mdash; and one that has been demanded since futures trading was resurrected in 2002-03, after a hiatus that lasted over four decades. At that point, one of the reasons for its reintroduction was to enable farmers to hedge their price risk, which was not protected by typical hazard-mitigating instruments like insurance. However, this objective remained unmet. First, farmers could not afford to pay the exchanges&rsquo; membership fees, which were high; the other requirements for access, including the payment of margins, were also onerous. Further, the minimum lot size that was stipulated for trading in the futures market is much larger than the marketable produce of most medium and large farmers. Naturally, small cultivators, who need risk coverage the most, are totally excluded.

Futures imperfect

The estimates of India&rsquo;s gross domestic product (GDP) for the third quarter (Q3), which ended in December 2011, were released by the Central Statistics Office yesterday. They should leave nobody in doubt about the trajectory of the economy&rsquo;s growth in the current financial year. At 6.1 per cent, not only has the growth rate been the lowest in any quarter since 2009, but it also confirms a steady deceleration over the last year; each succeeding quarter has clocked a lower growth rate than that in the previous one. The Q3 GDP numbers are a dampener for another reason. The advance estimates for the annual growth rate for 2011-12, earlier pegged at 6.9 per cent compared to 8.4 per cent in the previous year, may now appear over-optimistic, and the 7.1 per cent projection made by the Prime Minister&rsquo;s Economic Advisory Council even more unrealistic.

Timely warning

The success of the initial public offering (IPO) by the Multi Commodity Exchange (MCX) was astounding by any standards. It is especially notable given that the IPO market has been moribund for the past year. MCX offered 12.6 per cent of its equity, or Rs 633 crore worth of shares, at the high end of the price band of Rs 860-1,032 a share. Subscriptions hit Rs 36,000 crore, with record ratios of retail over-subscription (24:1).

Lessons in exchange

The general strike on Tuesday called by India&rsquo;s largest trade unions was only a partial success. That should serve as a reminder of the limitations of a trade union movement that, in the end, represents only a small fraction of India&rsquo;s workforce &mdash; those employed in the organised sector.

The insiders' complaint

The demographic trends in Indian internet usage and the ways in which Indian e-commerce is developing suggest that it is on the cusp of an explosion that could, in the next three years, turn it into one of the largest markets in the world. India has already become a test market for e-commerce because it exhibits unusual patterns that could be replicated elsewhere. India&rsquo;s netizens are young, highly social, unafraid to shop online and comfortable with mobile access.

Counting the clicks

The government&rsquo;s sale of about five per cent of its shareholdings in ONGC last week, through an open auction on the trading platforms of the two stock exchanges, raises several questions, which the government and its advisers would do well to reflect upon. For a successful auction of the ONGC shares on offer, two basic criteria needed to be fulfilled: a realistic assessment of the demand based on the prevailing market conditions and an attractive pricing for the investors. The government needed to receive appropriate advice on these matters. It is not quite apparent from the way the offer was managed if the government received such advice or whether it chose to ignore it. For instance, pricing the shares close to the market-traded price hardly made it attractive for the investors since they could buy them at around that price from the market. Moreover, an offer for sale that cannot be advertised publicly needs effective marketing and close monitoring by the owner-promoter.

The ONGC miracle

The petroleum ministry&rsquo;s &ldquo;single kitchen&rdquo; concept for new consumers of liquefied petroleum gas, or LPG, is a classic case of using a flawed solution to compensate for policy distortions in the pricing of petroleum products. The norm of allowing one LPG connection per household with one kitchen may look good on paper but it is hardly a foolproof mechanism to curb the misuse of the highly subsidised fuel. New consumers are required to give an undertaking that neither she nor any family member has a gas connection in the single-kitchen house (the penalty for violation is hardly draconian: the consumer forfeits her security deposit, which is a couple of thousand rupees).

Get out of the kitchen

The just-concluded Assembly elections in five states had one particularly noteworthy characteristic, obvious even before the votes are counted: the high turnout. In four out of the five states having elections &ndash; Uttar Pradesh (UP), Uttarakhand, Punjab and Goa &ndash; the proportion of registered voters who exercised their franchise was at an all-time high. The fifth state is Manipur; India&rsquo;s north-east has always had a high turnout. Punjab registered a 77 per cent turnout, up from 70 per cent in the Lok Sabha elections of 2009. Goa had 81 per cent of its electorate trek to voting booths, a similar record. Uttarakhand saw 70 per cent; in 2009 it was just 54 per cent. In UP, women voters in particular came out in numbers not hitherto seen.

Lining up to vote

Indian Railways (IR) seems to be caught in a time warp, kept there by successive ministers who have played to the gallery by announcing more and more new passenger trains without caring what this will do to the congestion in the network and the efficient carriage of revenue-earning freight traffic. There is no dedicated freight network in sight, which in turn slows down passenger traffic. At the very least, long-distance passenger travel should be separated, operationally and administratively, from freight and commuter travel. Also, there has been no new effort to raise passenger fares. This lack of modernisation, combined with stagnating revenue, is a recipe for disaster. Thus, the report of the committee headed by Sam Pitroda, which has cogently argued for rapid catch-up modernisation and set out a road map for it, will be widely welcomed.

Railways must modernise

The agriculture ministry&rsquo;s reported decision to tie the state-wise allocation of funds from the National Agriculture Development Plan (NADP) to the states&rsquo; progress on agri-marketing reforms seems likely to benefit both farmers and consumers. Yet the gains from releasing central assistance only conditionally could be substantially augmented.

The tying of farm aid

For the Congress party, there&rsquo;s no getting around it: in this round of Assembly elections, it has been roundly beaten. Uttar Pradesh, in particular, was a high-stakes contest. The party claims that its general secretary, Rahul Gandhi, created a &ldquo;favourable climate&rdquo; that its state unit failed to take advantage of. Yet that does not absolve the national leadership, including Mr Gandhi, of blame in failing to understand that elections are won through organisation, not well-attended rallies. In its failure to improve its statewide network sufficiently to increase its share of seats in Uttar Pradesh (UP), and in its failure to capitalise on the stasis that Punjab has suffered under the chief ministership of Parkash Singh Badal &ndash; who was first elected chief minister (CM) in 1970 &ndash; the Congress has shown that it is out of ideas. The omens are not good.

No more status quo

Now that the Assembly elections in five states are over, with what can only be called a defeat for the Congress, the pressure is on Finance Minister Pranab Mukherjee to help the United Progressive Alliance, in its second term, (UPA-II) out of the hole it&rsquo;s in. Mr Mukherjee&rsquo;s job is unenviable: the government has been stuck in policy paralysis for months; political obstructionism among its allies and the Opposition have held up basic reform; and the fiscal space has shrunk. Yet there is a certain minimum of reform that is both politically feasible and economically sensible. If this minimum is accomplished in the next Budget, Mr Mukherjee will have averted disaster.

The four essentials

As the National People&rsquo;s Congress, the People&rsquo;s Republic of China&rsquo;s stand-in for a directly elected legislature, opened this week, it has become increasingly clear that China&rsquo;s economy, polity and foreign stance are all going through a major transition. These transitions coincide with, but are probably largely unrelated to, the inter-generational transfer of power from the &ldquo;fourth generation&rdquo; of Chinese leaders to the &ldquo;fifth generation&rdquo;, a handover that is being managed to be as stable and continuous as possible. In terms of the economy, it is clear that China&rsquo;s leaders have accepted that growth is slowing. For the first time in years, the country has set a growth target below eight per cent &mdash; which many assumed to be the very lowest bound that the ruling party would permit, necessary to preserve political stability.

Congress of change

Union Railway Minister Dinesh Trivedi has, by both what he has done and by what he has chosen not to do, worsened the immediate future of the organisation whose well-being has been entrusted to him. In trying to prepare the groundwork for presenting a respectable budget for 2012-13, he has raised freight rates for major items by between 20 and 25 per cent. This is not all. He has also clearly indicated that passenger fares will not be raised for the time being. The need to do the latter has been virtually universally voiced, the latest by the parliamentary consultative committee for the railways. What is good for the Indian Railways (IR), currently in very poor financial and physical shape, is as well-known as it is simple: go easy on freight rates which make money, and raise passenger fares which do not &mdash; and have not been touched for years.

Sliding further downhill

The government&rsquo;s recent announcement on an action plan to ensure the supply of adequate amounts of coal for new power projects with an estimated capacity of more than 50,000 mw is a significant step, though how far it will help resolve the electricity sector&rsquo;s problems is a moot point. The action plan, approved by a committee of secretaries with none else than the prime minister&rsquo;s principal secretary at its head, stipulates that Coal India Limited will sign fuel supply agreements with power producing companies that will commission projects before March 2015 and for which they have entered into long-term power-purchase agreements with distribution entities. And for power plants that have been commissioned by December 2011, the fuel supply agreement will have to be signed before the end of the current financial year. If Coal India fails to meet its commitment under the fuel supply agreeement, it will have to arrange for the supply of coal through imports.

Fix the tariff

Incisive columns and editorial comment by top opinion leaders

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