12.06.2013 CA

CURRENT AFFAIRS (12.06.2013)
1. The state of real estate The principle of buyer beware has never been an adequate protective measure in real estate. Lack of transparency, information asymmetry and a maze of transactions have put consumers in an unfairly disadvantageous position. Even the most vigilant among them find home buying an agonisingly risky venture. While many countries have improved their regulations and climbed up the global real estate transparency ladder, India has been sliding steadily. From a poor 41st position in 2010, it has slipped further to reach 48th among the 97 countries reviewed. Self-regulation has clearly failed. Realising the urgent need to protect home buyers, the Union Cabinet has recently approved the Real Estate (Regulation and Development) Bill. This legislation, first conceptualised in 2011, is applicable only to residential projects. The full text of the updated bill has not yet been released, but the details circulated by the government indicate that it has largely retained the original objectives. A State-level regulatory authority will be set up, and developers will have to disclose all the details of their projects and submit approvals obtained to the authority, which in turn would make them public. Developers can advertise projects only after getting clearance, and must compulsorily deposit 70 per cent of the amount collected from buyers in a separate bank account. This would help prevent misuse of funds. Penalties for noncompliance include imprisonment. The new draft includes the activities of real estate agents. The proposed legislation has also improved on the previous version in terms of applicability. Now, projects on plots larger than 1000 square metres in size will be covered by the new rules; this reduced threshold will help bring a greater number of projects under monitoring. Some may argue that new regulations would increase the time and costs of projects, and burden buyers. This objection is invalid since the bill is about presale checking, and projects cannot commence without clearance. Second, the gains clearly outweigh the costs. Regulatory measures are common even in mature property markets. For instance, the Property Misdescriptions Act 1991 in Britain makes it a criminal offence to provide misleading or false information. Benami holdings abound in the real estate sector and clean up measures must address these. Perhaps the use of UID numbers — which is insisted upon even in disbursements of subsidies for the poor — should be made mandatory for property deals to track the money trail. The risks involved in property transactions would further reduce

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when land record management, building approval systems and enforcement mechanisms are also improved. 2. From park to nation The continuing public protests in Turkey, which started in Istanbul‘s Gezi Park but spread to several other cities, and the violence of the police crackdown, with three people killed and about 5000 injured, have exposed domestic fragilities that have surprised many around the world. The protests started on May 27, when small groups of people gathered to protest against plans to bulldoze the park, one of Istanbul‘s few remaining green spaces, for a shopping mall, and rapidly snowballed as scenes of police violence went viral on the internet. The rapid urbanisation of Turkey‘s main cities, with the construction of huge and ill -served residential complexes on the outer edges of urban sprawls, is one cause of discontent. Such unchecked expansion has also given rise to a new elite in the construction business; politically and socially conservative, many of the owners are natural supporters of Prime Minister Recep Tayyip Erdoðan‘s Freedom and Justice Party (AKP). They have, moreover, benefited from the lax implementation of building regulations; allegations of corruption abound. The building boom, in addition, may be more of an AKP political strategy than good business; 11 malls have already closed in Istanbul alone. Furthermore, the influx into Turkish cities of substantial numbers of building labourers from rural areas has caused tensions between the socially conservative labourers and longer-established urban residents, who for the most part strongly defend Turkey‘s strict constitut ional separation of faith and the state. The crackdown, with Mr. Erdoðan dismissing the protests as ―anarchy‖, nevertheless confirms how much the Prime Minister stands to gain by it and by continuing to intimidate the Turkish press. He does not need the support of secularists while the AKP‘s funding base and vote banks are secure; the party won half the vote in the last election. Secondly, Turkey‘s geopolitical situation favours his authoritarianism. He is very bitter about the European Union‘s message that Turkish accession is on indefinite hold, and will ignore EU opinion. Thirdly, Ankara can rattle Nato by even hinting at the closure of Nato bases, many of which were installed by Turkish military dictators in the Cold War and which the west may now see as a possible front against Iran. In addition, Turkey is too profitable for western businesses to stay away from, even if the protests are currently hitting tourism revenues. Yet the country‘s long democratic traditions are now resurfacing, with AKP seniors expressing doubts about the repression and the

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police pulling back from occupied squares and streets. Mr. Erdoðan cannot and must not maintain his intransigence indefinitely. 3. India ‘surprised’ by U.S. spy programme reports India on Tuesday voiced its concern at and surprise over reports that it was the fifth most tracked country by the American intelligence apparatus, which reportedly used a secret data-mining programme to monitor worldwide Internet data. ―We feel that the Cyber Security Dialogue coordinated by the National Security Councils on both sides is the appropriate forum to discuss such issues. We intend to seek information and details during consultations between interlocutors on both sides on this matter. If Indian laws relating to privacy of information about ordinary Indian citizens have been violated, surely we will find it unacceptable,‖ External Affairs Ministry spokesperson Syed Akbaruddin said. ―Yes, we are concerned and surprised over it,‖ he said noting that reports about the spy programme was an evolving situation. ―We will take it as it evolves and have a better understanding and a clearer paradigm of how to tackle this issue once broader parameters in its entirety are available for us,‖ he said. According to the Guardian newspaper, India was the fifth most tracked country with 6.3 billion pieces of information being collected from the country‘s computer and data networks in one month alone. The daily claims to have acquired top secret documents about the U.S.‘ National Security Agency‘s data-mining tool, called Boundless Informant. Khurshid’s Norway visit On External Affairs Minister Salman Khurshid‘s current visit to Norway as India embraces the Arctic Council, the spokesperson said India was also wooing the $ 700 billion sovereign wealth fund of Norway. He said the Minister would take forward discussions that Fund officials had here with senior government officials, including Finance Minister, P. Chidambaram and Deputy Chairman of Planning Commission Montek Singh Ahluwalia in April. ―The Minister will see how to facilitate investments in to the country, including in the infrastructure sector,‖ the spokesman said. The sovereign wealth fund, reportedly one of the richest in the world, was a government pension fund. During the visit, Mr. Khurshid would also have a bilateral meeting with the Norwegian Foreign Minister and other senior officials, including the Prime Minister. 4. India disputes Pakistani’s claim on Roerich paintings Legendary Russian artist Nicholas Roerich could not have imagined that two of his precious paintings would one day become a bone of contention between a
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Pakistani, who claims matinee idol Devika Rani gifted them to his grandfather Nazir Ahmed Khan, a known actor in the pre-Partition Hindi film industry, and the Indian government in a British court of law. There are interesting twists and turns in this whole drama. The name of actor Devika Rani, daughter-in-law of Nicholas Roerich, cropped up and was used by Zahid Nazir to bolster his claim that the late actor had gifted Roerich‘s two outstanding artistic impressions to his grandfather Nazir Ahmed Khan, who was brother-in-law of filmmaker K. Asif. Indeed, Nazir Ahmed Khan worked in a number of Indian and Pakistani films. He was one of the first successful heroes in pre-Partition India and later migrated to the then newly formed Islamic country after his studio in Bombay was burnt down during the Partition riots. Devika Rani was married to the famous Russian painter‘s son Svetoslav Roerich and naturally as daughter-in-law of the famous artist she must have inherited his prized possessions – art works. While there is a possibility that she may have gifted the two artistic impressions to actor Nazir Ahmed Khan, the two paintings titled ―Himalaya Kanchenjunga‖ and ―Sunset Kashmir‖ were the prized possessions of the Indian Agricultural Research Institute (IARI) on Pusa Road before they were stolen in 2009. Subsequently, the work of art landed up at auction house Sotheby‘s. Talking to The Hindu , a former Indian Council of Agricultural Research (ICAR) Secretary rubbished the Pakistani‘s claim. ―We cannot take Nazir‘s claim that Roerich‘s paintings had been lying at his Lahore house in seriousness because they were our property till they were stolen. Roerich Museum (St. Petersburg) director Krylov had seen the paintings at IARI in 1999 and Roerich Museum New York curator Tepsa had also testified that the paintings were the property of IARI.‖ However, the IARI came to know about the disappearance of the two paintings when Sotheby‘s sent a letter ―either in 2010 or 2011 informing that it had verified from the Roerich Museum of New York that the two paintings indeed belonged to the IARI. But the IARI did not inform the ICAR. When we came to know through informal sources we jumped into action.‖ To pursue the matter in all seriousness, a team comprising the CBI, IARI and ICAR went to the United Kingdom to meet lawyers and work out modalities to bring the national heritage back home. ―The matter is in the British court even now. We are fighting the case,‖ says IARI Director H.S. Gupta. Each of the priceless treasure trove costs over £2 million. In fact, a Delhi court recently asked the U.K. Home Department to allow the CBI to probe the case of Roerich‘s paintings being stolen from the IARI and presented to a London auction house by a Pakistani and a British resident. It came to the IARI‘s notice that the two paintings were presented to Sotheby‘s for auction by Zahid Nazir, a resident of Pakistan, and his father Rafay Nazir Khan, who lives in London. After the matter came to the notice of Indian authorities, the attorney of Zahid Nazir and Rafay Nazir Khan
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wrote to the IARI Director on May 16, 2011, claiming that they were the owners and consignees of the two paintings. And the paintings have been in the family ownership since at least late 1960s or early 1970s and were kept at their family home in Lahore until they were shifted to Sotheby‘s in 2010. 5. India ranks 141 of 162 countries in peace index, even lower than Sri Lanka India’s ranking was brought down by militarisation, conflicts and corruption India ranks low at 141in this year‘s Global Peace Index (GPI) that measured peace in 162 countries, according to 22 qualitative and quantitative indicators of the absence and fear of violence. The major indicators that bring down India‘s ranking are militarisation, domestic and international conflicts, and corruption. However, despite an increase in military expenditure, India made positive gains in its level of peace after reductions in deaths from internal conflict and the level of perceived criminality in society, according to the 7th edition of the annual GPI released on Tuesday. In the South Asian region, Sri Lanka is one notch above India at rank four while Bhutan is the most peaceful country. It is followed by Nepal, Bangladesh, Sri Lanka, India, Pakistan and Afghanistan, in that order. Globally, a dramatic rise in the number of homicides and 59 more countries increasing their military expenditure as a percentage of Gross Domestic Product were the key drivers in making the world a less peaceful place, according to the 2013 GPI. This year‘s findings underline a six-year trend showing a deterioration of five per cent in global peace. In this time, 110 countries have seen their score deteriorate while only 48 became more peaceful. The economic impact of this five per cent loss in peace came at a cost to the global economy of $473 billion last year. Rise in homicides The sharp increase in the number of homicides — up eight per cent over the last year — can be almost entirely attributed to Latin America and Sub-Saharan Africa with, for example, the homicide rate in Honduras further increasing by almost 10 per 100,000 people — becoming the highest in the world at 92 homicides per 100,000 people. Steve Killelea, founder and Executive Chairman of the Institute for Economics and Peace (IEP), said: ―The migration of populations to urban a reas in developing countries has been a key driver in the rise of homicides worldwide. This has also led to an increase in violent crime. It is essential for the police to gain the trust of those living in city slums; to achieve this, addressing police corruption would be a first important step.‖ The overall deterioration of the military spending indicator in the GPI is primarily due to a large number of low-middle income
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countries, typically authoritarian regimes like Iran, Iraq, Oman, Zimbabwe and Afghanistan, Cote d‘Ivoire and Democratic Republic of the Congo having increased their expenditure to more than seven per cent of GDP. In contrast, some slight improvements were evident over the last year on the indicators of the likelihood of violent demonstrations and the Political Terror Scale, a measure of State-sponsored terror, with improvements in countries such as Kenya, Kyrgyz Republic, Zambia, and Tunisia. Syria‘s descent into civil war recorded the greatest score deterioration in the history of the Index. Additionally, many Middle Eastern and North African countries continue to be affected by the fallout from the Arab Spring with violent demonstrations and further political instability. The data also revealed evidence of countries being able to make significant gains in peace. Libya, for example, experienced the greatest rise in peace as its newly elected government and recovering institutions were established following the turmoil of the recent revolution and civil war. North Africa also had more to celebrate as Sudan and Chad experienced the second and third most substantial gains as their respective conflicts eased. Europe remains the most peaceful region comprising 13 of the top 20 countries, including Iceland, which continues to rank first. However, several high debt countries including Spain, Greece, France and Portugal experienced less peaceful conditions amid challenging economic circumstances during the last year. This also reflects the six-year trend data, which shows that countries that suffer from recession decrease in peace at a greater rate than the rest of the world. 6. Rupee sinks to a new low, banks step in to stem slide It recovered to close at 58.39/40 per dollar against 58.15/16 Breaking all barriers, the rupee fell to an all-time low of 58.98 per dollar intra-day on Tuesday at the foreign exchange market. . However, dollar selling by public sector banks and exporters prevented the Indian currency from dipping below the 59 per dollar mark. The rupee recovered to close at 58.39/40 per dollar compared to its previous close of 58.15/16. ``Re-surfacing of concerns on widening trade and current account deficit (CAD) has lead to a sharp fall in the rupee,‖ said Ajay Bodke, Head of Investment Strategy & Advisory at Prabhudas Lilladher. ―Dollar is continuing to strengthen against other currencies due to the belief that the U.S. economy is on the firmest footing among developed markets. This has rekindled concerns about tapering of bond purchases by the U.S. Fed sooner rather than later, potentially impacting FII flows to emerging markets,‖ said Mr. Bodke. With India‘s massive dependence on fickle FII flows to bridge its large CAD, India remained particularly vulnerable to this potential development, he added. ―In June
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itself, in few short days, the Indian rupee has depreciated over 4 per cent against the dollar, and more so against the other currencies such as Euro and Pound,‖ said Anindya Banerjee, Currency Analyst, Kotak Securities. ―Fear of QE (quantitative easing) unwinding by the U.S. central bank and overly short positioning in dollar could have been the reason behind the movement of rupee. A weak rupee does not augur well for corporates who have un-hedged foreign currency loans or large concentration of net imports,‖ said Mr. Banerjee. However, he said that ``over the near-term, we could see a range bound action in rupee / dollar between 57.50 and 59.00, as recent spate of depreciation has been too fast, and a consolidation is warranted ahead of the U.S. Fed meeting on June 19.‖ Stocks close lower A weak rupee and also a strong yen have triggered a sell-off in the domestic equity market. The Bombay Stock Exchange (BSE) 30-Share Sensitive Index (Sensex) lost 298.07 points or 1.53 per cent. The midcap and smallcap stocks lost 1.60 per cent and 1.82 per cent, respectively. The fall was led by consumer durables, which tumbled by 6.36 per cent, followed by metals 4.13 per cent, realty 3.68 per cent, banks 2.24 per cent, power 2.07 per cent and PSUs 2.04 per cent. All sectoral indices ended in the negative territory. A broader National Stock Exchange (NSE) Nifty ended at 5788.80 with a fall of 89.20 or 1.52 per cent. Other broader indices too were down. BSE 100 lost 1.56 per cent. BSE 200 and BSE 500 lost 1.59 per cent each. ―Markets were weak largely because of the weakness in rupee and also the weak opening of European markets. We expect normal monsoons further to which fiscal reforms from Government of India on the core sector will provide support to the markets going ahead,‖ said Mr. Banerjee. ―The rupee‘s sudden depreciation has led to some outflows and correction in the equity markets as well. The fact, however, is that in the past few months India‘s fundamentals have improved, with inflation declining from 8-9 per cent in the last few years to about 5 per cent levels,‖ said Lalit Thakkar MD- Institution , Angel Broking. ―Because of temporary surge in gold buying as well as global jitters regarding QE, markets have not yet factored in the domestic positives,‖ said Mr. Thakkar. ―In my view, in the coming weeks the market is likely to reverse its losses,‖ he added. 7. Curbs on gold imports showing results: Mayaram The Government‘s recent measures to curb gold imports have started showing results, with the demand for foreign exchange for gold purchase going down significantly in the past five-seven days, Arvind Mayaram, Economic Affairs Secretary, said here on Tuesday. ―It (the demand for foreign exchange for gold
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purchase) has come down from a peak of $227 million to $7 million in a particular day. The average has been $41 million,‖ Mayaram said. ―Steps….taken on gold. They have started showing results,‖ he added. RECENT STEPS Spiralling gold imports this fiscal had added pressure to the widening current account deficit, which is estimated to have touched five per cent of gross domestic product as on March 2013. To tackle this situation, the Centre had on June 5 hiked import duty on gold to eight per cent, from six per cent earlier. On its part, the Reserve Bank of India extended certain existing restrictions on gold imports by banks to nominated agencies and premier trading houses. The central bank had stipulated that gold imports on consignment basis by banks and nominated agencies shall be permissible only to meet the needs of exporters of gold jewellery. The RBI had also stipulated that all letters of credit to be opened by nominated banks/agencies for import of gold under all categories will be only on 100 per cent cash margin basis. It appears all these steps seem to have cumulatively helped moderate demand for foreign exchange to buy gold. NO NEW MEASURES Meanwhile, Raghuram Rajan, Chief Economic Advisor to the Finance Ministry, said he expected a significant drop in gold imports in June, mainly due to the joint efforts of the Government and RBI. ―We are not contemplating any additional restrictive measures on gold and there is no reason for speculating on this basis,‖ Rajan said here on Tuesday. He said gold imports for the first 13 business days, till May 20, averaged $135 million a day. However, in the 14 subsequent days till Friday of last week, the average was only $36 million. India‘s gold import bill in the first two months of the current fiscal was earlier estimated at $15 billion. It was about $7.5 billion in April. The average quantum of monthly gold imports so far this fiscal was 150 tonnes. This is almost double the monthly average of about 70 tonnes last fiscal. 8. India allows exports of imported products to Iran against rupee payment India has allowed export of imported products to sanction-hit Iran under the rupee payment mechanism provided 15 per cent value addition takes place in the country. The move is aimed at fuller utilisation of the rupee payments accumulated in India‘s UCO Bank for oil purchased from Iran. ―Exports of such goods to Iran which have been imported against payment in freely convertible currency would be
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permitted against payment in Indian Rupees also, subject to at least 15 per cent value addition,‖ a notification by the Directorate General of Foreign Trade said. ―Now that the entire payment to Iran for its oil is being made by India in rupee, it is much more than what can be paid to our exporters for the merchandise exports being made to Iran. By allowing imported items to be re-exported, the Rupee balance could be used up substantially,‖ a Commerce Department official told Business Line. Iran is facing economic sanctions from the US and the EU for its alleged nuclear activities, and has been boycotted by most companies in the West. Since foreign banks refused to handle payments to and from Iran fearing crackdown by the US, India put in place a rupee payment mechanism last year to continue trading with the country. The mechanism allows payments for Iranian oil to be deposited in India‘s UCO Bank in Indian rupees. The money is then used to make payments to Indian exporters to Iran thereby avoiding payments in dollars and through foreign banks. There is a substantial amount of rupee balance in Iran‘s account lying idle which the Government hopes would be used up now that it has relaxed the condition of origin of goods for exports. Indian exporters have welcomed the move but cautioned that there should be limits placed on the reexports. ―The move will benefit Indian exports and we can loo k forward to sizeable growth in the country‘s exports to Iran in the current fiscal. However, the Government should put a cap on such exports so that the basic idea of promoting manufactured exports remains the focus,‖ FIEO President Rafeeque Ahmed said. According to FIEO, the opening of Letter of Credit from Iran under the rupee payment mechanism has been impressive touching about $400 million on a monthly basis. ―With the new provision being put into place, we can look for exports close to $6 billion in 2013-14,‖ Ahmed added. India‘s exports to Iran in 2012-13 increased 39.4 per cent to $3.36 billion from $2.41 billion in 2011-12, mainly due to the concerted efforts made by both countries to increase India‘s exports. While India‘s oil purchase from Iran went down to 13.3 million tonnes in 2012-13 from 18.1 million tonnes the previous year because of the Western sanctions, Iran still has a trade surplus of about $8 billion with India. 9. The mechanics of money Can ideas from the realm of science be applied in financial markets? A recent book puts the issue in perspective. Let me start with an admission which is that I don‘t read as much as is commonly believed. It‘s just that I refer to books in my speeches which conveys the impression that I am reading almost every book that is being printed. (Printed? Yes. Not sure whether I will, or indeed will ever want to, get into the kindle mode). That is guff; the reality is much less flattering. These days, I read much less than I should or I need to. I lived in Addis Ababa in
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Ethiopia for two years when I was in the World Bank; my family stayed back in India. After the job offer was made to me, my prospective manager took me out to the best Italian restaurant in town and marketed the job to me all through the dinner. Best advice As we were finishing, he asked, ―Do you have any concerns?‖ I said, ―All that you said about the job is very good, Fred. But, what do I do over the weekends?‖ His reply was one of the best pieces of advice I ever received: ―Subba, think of all the books you wanted to, but could not read. Plunge into them.‖ That‘s exactly what I did – for all of two years until I moved to Washington and all its distractions. It is not that as Governor I don‘t get the time to read. I do. But the time that I ge t is irregular – not the most conducive for book reading. I keep telling myself that I must read for at least half an hour every day, but have failed so far. So, when I finish reading a book, it feels like a big accomplishment. It‘s also comforting because I am at least trying to live up to the hype that the RBI Governor is a wellread person. Finance is people I‘ve just finished reading The Physics of Wall Street by James O. Weatherall, a PhD in physics, and now an Assistant Professor of Philosophy in the University of California at Irvine. We all know that post-crisis, use of quantitative techniques in finance has come for a lot of harsh criticism, even ridicule. The charge is that the so-called quants brought in sophisticated mathematical modelling to finance, ignored the limitations of the assumptions underlying their models and made predictions with beguiling precision, all of which encouraged excessive risk-taking and brought on the eventual meltdown. Forgotten in this euphoria was the fact that finance deals with people, not physical objects. The laws governing financial markets are not immutable like the laws of physics. The most high-profile, if also the most strident of such critics, has been Nassim Taleb ( Black Swans, Antifragility) who argues that the world is just too random and any attempt to find a structure is futile, and any claim to finding one is hubris. But there is another side to this debate. The use of quantitative techniques contributed enormously to the growth of the financial sector. The Black-Scholes options pricing model, for example, was more than a piece of geeky mathematics; it was transformational.

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It ended the anti-intellectualism of American finance, demonstrated that a more scientific approach to speculation is possible and converted financial markets from bull rings to quantitative power houses. Engrossing history That story needed to be told and The Physics of Wall Street does that. But the book is more, indeed much more, than a spirited defence of the value that quantitative frameworks brought to the financial sector. It is an engrossing history of several mathematicians and physicists who made a foray into finance with their different mental constructs and tool-kits. Some of these transitions were serendipitous, others were more deliberate and structured – but all of them were interesting and fascinating. The history that Weatherall tells starts much before Black-Scholes, actually with the French mathematician Louis Bachelier, and his 1900 paper which argued that stock prices capture all available information and move randomly. This was in essence what later came to be formulated by the Chicago School as the efficient market hypothesis except that Bachelier didn‘t call it that. In a just world, says the author, Bachelier would be to finance what Newton is to physics. After taking us through the history of several other scientists who brought fresh thinking, concepts and techniques to finance, the book ends with a rallying cry by the author for an ‗Economics Manhattan Project‘ calling on the advanced economies, particularly America, to invest intellectual and financial resources in an interdisciplinary project with a lofty goal of generating ideas for making the financial sector an aid to real sector growth. Making things happen The use of quantitative techniques in finance has perforce to reckon with the quirks of human behaviour. As The Economist asked some years ago, is a hurricane more likely to hit because more hurricane insurance has been written? Common sense says no. But in the financial world, that common sense does not hold. The more financial insurance is written, the more likely that the insured event will occur because people who benefit from that contingency can make it happen. Can mathematical models replicate complex human behaviour? If they can‘t, are they any good at all? The book‘s answer is that making simplifying assumptions in building models leads to solutions to problems that are otherwise intractable. But those solutions are valid only as long as the assumptions underlying the model hold. The difference between physicists and finance professionals, according to the author, is that physicists are trained to ask: ‗When do the assumptions of my model fail and what happens then?‘ The post-crisis response should then be not to shun
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quantitative modelling but to be conscious of the limitations of quantitative models. And, of course, to improve them to approximate reality as closely as possible. 10. Micromanaging the chain Is government serious about FDI in retail or not? It was not so long ago that the United Progressive Alliance staked its survival on allowing foreign direct investment (FDI) in the retail sector. The point then made was that FDI would help the modernisation of India's leaky farm-to-plate chain for produce and empower local producers at the expense of middlemen. This logic has been assailed by many, but still seems essentially sound. The government then went out of its way to ensure that 100 per cent FDI in single-brand retail faced no more hurdles, making concessions to Swedish household goods giant IKEA in particular. It is puzzling, therefore, that the same dedication does not seem to be in evidence when it comes to FDI in multi-brand retail - where the supply-chain argument applies most strongly. Indeed, with the issue of recent "clarifications" by the Department of Industrial Policy and Promotion, or DIPP, the government seems to have decided to ensure that few, if any, actual foreign investors choose to enter the sector. The DIPP has set out several restrictions. For one, all structures need to be owned by the company - which means that franchises won't be permitted. In addition, 50 per cent of the total investment has to go towards back-end infrastructure - but buying existing infrastructure, however poorly used, won't go towards that total. This will tie up capital uselessly in unprofitable enterprises, rather than freeing it to go elsewhere in investment-starved India. Further, the clarifications make it appear to most observers that wholesale companies won't be able to sell their products to retailers from the same group, an unnecessary restriction if the ends of the policy are to ensure that corporate investment flows into the entire supply chain. Some retail business models would also require the operation of the back-end to be outsourced to more local operators - and the new definition of "group companies" appears to rule out that possibility. The law also stated that 30 per cent of goods had to be sourced from small and medium enterprises; the DIPP has further insisted that these sourced goods should not be agricultural and must be sold in
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newly constructed stores, not through the acquisition of existing stores or through exports. On the one hand, it can be argued that these are merely attempts at closing the loopholes in the law and ensuring that retailers invest their money where the government intends them to. However, that isn't a market-oriented way of going about things. If the point of higher FDI in retail was to trust capital to get to work at declogging India's supply pipe to its cities and towns, the government should get out of the way and not micromanage things. Instead, it seems to have decided to allow bureaucrats excessive power over where and what companies decide to buy and invest - which defeats the entire purpose of the legislation. Unsurprisingly, both domestic and foreign retailers are extremely unenthusiastic about the DIPP's actions. Prime Minister Manmohan Singh, at the time the Congress decided to make an issue of FDI in retail, had addressed Indians on television; his party president spoke with him at a rally called on that very issue in Delhi. Dr Singh should now ask if it is his own administration's statist instincts, and not reluctant state parties, which are causing this forward-looking reform to face unnecessary hurdles. 11. Urbanise, smartly Clearances will be key to new towns on Delhi-Mumbai corridor The concept of the smart city, planned to provide employment and high-quality services to residents, is attractive. Instead of the usual pattern of haphazard growth, smart cities provide for adequate housing, transport, power, water and sanitation. Besides, they pay due attention to energy efficiency, sustainable use of natural resources, railway connectivity and so on. The government has grandiose plans to set up such cities across 28 states. The proof of that concept depends on seven clusters along the Delhi-Mumbai Industrial Corridor, or DMIC. The DMIC connects the industrial heartland to ports on the Arabian Sea, running some 1,500 kilometres across seven states. This region contributes 43 per cent of GDP and over half of industrial production and exports. The Dedicated Freight Corridor project will provide capacity to move goods at much higher speeds. Industrial production in the DMIC is projected to expand at a compounded annual growth rate (CAGR) of 13 per cent by 2020 and lead to massive employment generation.
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The seven smart nodes are planned to cater to populations of between 1.3 million and 2.25 million, with commensurate employment. What of the cities themselves? The master plans of the DMIC Development Corporation, or DMICDC, have certain common concepts. Each city will be governed from a command centre where information technology will be used for the real-time monitoring of energy, public safety, water, transport and logistics. The plans are polycentric, with multiple industrial zones and city business districts. Mixed land use is encouraged. Housing will be located near industrial zones with high-access mass transit corridors, thereby reducing personal vehicle use. Renewable energy capacities will be integrated to ensure power self-sufficiency. Water demands will be met by a combination of river water, new aquifers, reservoirs, desalination and water harvesting. Wastewater and solid waste will be recycled. Environmental damage will be minimised and agricultural land conserved, with extant villages integrated into the master plan. All this will cost upwards of Rs 55,000 crore. As far as possible, required investments in infrastructure are proposed to come through the public-private partnership mode. The DMICDC projects that break-even should occur around year 13. Given differences in state laws and differential levels of administrative efficiency in the seven states, land acquisition will take place through different modes in each node. Environmental and other statutory clearances would have to come from the Centre. These two issues - land and clearances - could be the make-or-break factors. Financing, especially private investments, will come only if these two elements fall in place - and they must. Projects like these must work if India is to undergo an orderly migration of population. Otherwise India's urban infrastructure will be overwhelmed. By 2030, over 40 per cent of Indians will live in urban clusters and contribute about 70 per cent of GDP. The sheer scale of India's internal migration dwarfs anything outside much better prepared China. Existing urban infrastructure is already stretched beyond its limit. Planned cities could provide an alternative to the miserable, under-provisioned urban clusters that are fast becoming the norm in India.

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12. China's latest "sacred" manned space mission blasts off A Chinese manned spacecraft blasted off with three astronauts on board on Tuesday on a 15-day mission to an experimental space lab in the latest step towards the development of a space station. The Shenzhou 10 spacecraft was launched from a remote site in the Gobi desert in China's far west at 5:38 p.m. (0938 GMT) under warm, clear blue skies, in images carried live on state television. Once in orbit, the craft will dock with the Tiangong (Heavenly Palace) 1, a trial space laboratory module, and the two male and one female astronauts will carry out various experiments and test the module's systems. They will also give a lecture to students back on Earth. China successfully carried out its first manned docking exercise with Tiangong 1 last June, a milestone in an effort to acquire the technological and logistical skills to run a full space station that can house people for long periods. President Xi Jinping oversaw Tuesday's launch personally, addressing the astronauts before they blasted off to wish them success, saying he was "enormously happy" to be there. "You are the pride of the Chinese people, and this mission is both glorious and sacred," Xi said, according to state media. This mission will be the longest time Chinese astronauts have spent in space, and marks the second mission for lead astronaut Nie Haisheng. It is China's fifth manned space mission since 2003, and was accompanied by the usual outpouring of national pride and Communist Party propaganda, including children dressed as happy ethnic minorities waving off the three at the space centre. However, some wondered why China was spending so much money exploring space when it was still a developing country with a plethora of more pressing issues, from food safety and pollution to the prevalence of workplace fire disasters. "Why don't they spend this money solving China's real problems instead of wasting it like this?" wrote one user on China's popular Twitter-like service, Sina Weibo. China's space programme has come a long way since late leader Mao Zedong, founder of Communist China in 1949, lamented that the country could not even launch a potato into space. But China is still far from catching up with the established space superpowers, the United States and Russia. Rendezvous and docking techniques such as those which China is only testing now were mastered by the United States and the former Soviet Union decades ago, and the 10.5 metrelong Tiangong 1 is a trial module, not a fully fledged space station. Still, the Shenzhou 10 mission will be the latest show of China's growing prowess in space and comes while budget restraints and shifting priorities have held back U.S.
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manned space launches. China also plans an unmanned moon landing and deployment of a moon rover. Scientists have raised the possibility of sending a man to the moon, but not before 2020. While Beijing insists its space programme is for peaceful purposes, a Pentagon report last month highlighted China's increasing space capabilities and said Beijing was pursuing a variety of activities aimed at preventing its adversaries from using space-based assets during a crisis. Fears of a space arms race with the United States and other powers mounted after China blew up one of its own weather satellites with a ground-based missile in January 2007. 13. Concerted war only answer to Maoists Shocked over the recent audacious Maoist attack in Chhattisgarh, political parties on Monday unanimously rejected the ―pernicious Maoist doctrine‖ and endorsed a stronger, sustained and unified operation against them without any compromise. This line had found support from the chief ministers of the states affected by Maoist depredations during the CMs‘ conference also. Now that there is a political consensus, it is time to translate the resolve into action on the ground. Joint operations by security forces of the different states and the Centre have been on for quite some time, but what has been missing is a total collaborative exercise where each of the Naxal-affected states becomes a stakeholder in any anti-Naxal programme anywhere. Apart from training and equipping security forces with the latest weapons, the political resolve should not be allowed to weaken. The Centre and the states must ensure that unlike earlier occasions, when momentum was lost after similar brainstorming sessions, a co-ordinated attack against Maoists is stepped up. While it is crucial that intelligence on the movement of top Maoists must be strengthened by winning the confidence of tribals and village folk, the secrecy of co-ordinated operations must be protected. News suggesting a major operation will soon be launched in Chhattisgarh has been doing the rounds for days, in a typical reflection of poor secrecy. With the porous borders between states, it is not difficult for Maoist leaders to shift from a state where an operation is on way to comparatively safer hideouts in the jungles of a neighbouring state. On test in the coming weeks would be the sincerity of state governments to work in unison. The unfortunate tendency of some states has been to pay lip service to coordination but to neither share intelligence nor come to the rescue of another state. While the Union home secretary has time and again ruled out an army operation, it

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would be foolhardy not to fall back on this if the co-ordination of police forces proves illusory. 14. Security should not compromise privacy The United States is engaged in a debate over the right balance between security and privacy in the light of news reports, based on leaked government documents, that revealed details about the surveillance programmes run by the National Security Agency. While the defenders of surveillance, authorised by the questionable Patriot Act, claim that it has disrupted plots and prevented terrorist attacks, its critics debunk the argument that a programme to collect huge amounts of information about Americans‘ phone calls and Internet activity has led to foiling any terrorist plot. Until the leaks, Americans had no clue that their telephone calls were being monitored and, thus, their right to privacy was being throttled If a comparatively free society with strong privacy laws like the US can have a security agency apparently running amok, there is no guarantee that the right to privacy will be respected in any other country. Such thoughts have arisen over reports that India is in the process of creating a multi-agency body called the National Cyber Co-ordination Centre, which will monitor all aspects of Internet use. With the use of Internet by individuals, outfits and companies increasing by leaps and bounds for professional, business and entertainment purposes, any agency which can monitor such activities will be privy to data that can compromise the Internet users‘ interests. It will strike at the roots of the right to privacy. The Supreme Court has said that the right to privacy is part of the right to protection of life and personal liberty, enshrined in Article 21 of the Constitution and fundamental to the well-being of a nation. While the recent arrest of cricketers, based on the tapping of their phone calls, might have been justified, it is also a pointer to the eavesdropping capabilities of police. To prevent US-style scandals in India, it is necessary to ensure all agencies involved in surveillance are governed by mechanisms that consider citizens‘ right to privacy sacrosanct. 15. Patents must balance profit with social cost The US Supreme Court‘s verdict on a rather unique case, which seeks to answer the question if human genes can be patented, will soon be available. The case relates to the claims of Myriad Genetics, a biotech company that has patented two genes, BRCA-1 and BRCA-2, which are responsible for breast cancer. According to a plaintiff in the case, the Myriad‘s ―monopoly on the BRCA genes makes it impossible for women to access other tests‖. As a result, this ―monopoly‖ has
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prevented the use of better technologies and pushed up costs. The rationale for patents is to ensure that the inventor‘s discoveries, or intellectual property rights, are not negated by other researchers. Normally, the rights relate to an invention that is totally new. In the present case, however, the question is whether the genes, which are natural, fall in this category. The BRCAs are, of course, not ―normal‖ genes but mutations that cause the ailment. Even then, to claim that the company has ―discovered‖ them is stretching the point, for the mutations are a natural process which may or may not take place. However, Myriad has a point when it says that firms which develop a process to identify the mutations have the right to patent it. Otherwise, investments in genetic research will be discouraged. Lower courts have been unable to decide if the process of isolating a mutated gene is creative enough to be patented since nature itself cannot patented. The judgment will be known in a few weeks even as film star Angelina Jolie‘s mastectomy operations followed the discovery that she carried the ―faulty‖ BRCA-1 gene. However, since not everyone who is prone to cancer is a celebrity, a balance has to be achieved between the commercialisation of research and its social purpose. Also, the publicly funded human genome project would have made the Myriad‘s discovery possible any way. 16. NCTC only after consensus: Shinde Union Home Minister Sushilkumar Shinde on Tuesday made it clear that the Centre would not take any unilateral decision regarding the setting up of the National Counter Terrorism Centre (NCTC). Speaking at the Union Ministry of Home Affairs‘ (MHA) monthly media briefing, Shinde said there were certain issues that needed to be resolved and he would soon consult all the opposing states in order to evolve a consensus. ―When such opposition is there we will think over it and then decide. We need to evolve a consensus on it. I have said many a time that both the Centre and the states need to work together. We cannot do it alone,‖ he said. The minister also mentioned several vexed issues that were resolved following consultations between the Centre and the state governments,which resulted in the revised Standard Operating Procedures (SOP) being incorporated in the NCTC draft. ―First, the CMs‘ objection that it should not be under the Intelligence Bureau (IB). So we took it off. They also said its operationalisation should not be under the IB and that also we did. I will only say that we tried to have a Central intelligence agency but they said a multi-agency centre is there,‖ he said. On whether the Centre was planning to take the NCTC to the Cabinet Committee on Security (CCS), Shinde said the MHA had received several inputs from the
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opposing states, which were being looked into. Hence, a decision on whether to take the issue to the CCS will be taken only after the due process. ―As of now there is no question of taking the NCTC to the CCS,‖ the minister said. Chief Ministers like Mamata Banerjee (West Bengal), Nitish Kumar (Bihar), Jayalalithaa (Tamil Nadu), Narendra Modi (Gujarat), Raman Singh (Chhattisgarh), Shivraj Singh Chouhan (Madhya Pradesh) and Punjab Deputy Chief Minister Sukhbir Singh Badal have opposed even a watered-down proposal for NCTC during a recent meeting on internal security here. The Home Minister Sushilkumar Shinde had earlier said his Ministry was not exploring the option of bringing a Bill in Parliament for the purpose. After the 26/11 Mumbai terror attack, the then Home Minister P Chidambaram had announced the government‘s intent ion to set up NCTC. According to the February, 2012 executive order, which faced strong opposition from non-Congress Chief Ministers, NCTC will work as an ‗integral‘ part of Intelligence Bureau and its director will report to the IB chief. Besides, the anti-terror body was given ‗power‘ to carry out operations, including arrest, search and seizure, while keeping the state police concerned in the loop. 17. Rise in financial savings signal lower gold imports, safer rupee With anxiety growing in proportion to the rupee's fall, resurgent investor interest in financial instruments is good news. Investors have started putting their money in mutual funds and insurance, says the latest data from markets regulator Sebi and insurance regulator Irda. This is welcome diversion of savings from gold. Sebi's data shows net inflows of Rs 1.06 lakh crore into mutual fund schemes during April, the highest in two years. Independently, Irda sees a 19 per cent increase in the first-year premium collections of life insurers in April at Rs 1,334 crore against Rs 1,125 crore in the same month last year. This is a welcome sign that investors are regaining confidence in financial savings. To keep the momentum going, the government needs to come out with more products like inflation-indexed bonds (IIBs) and raise the foreign direct investment ( FDI) limit in insurance, so that private insurers can continue to grow their business — prudential norms call for growing capitalisation of insurance companies as their premium collections grow. Gold imports have been a major factor in widening the current account deficit and weakening the rupee. The weakening of the global price of gold has already seen an erosion in gold's appeal as an investment option. When investors regain confidence in the ability of financial instruments to yield returns at least on par
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with what gold offers, they would ditch gold. The April data suggest early signs of that happening. The government has been battling to curb the demand for gold. It has raised import duty to 8 per cent from 2 per cent. The RBI has disallowed import of gold on credit and directed banks not to import gold on a consignment basis for domestic use. The rupee's slide might seem to refurbish gold's sheen. But this would be transient. A lower rupee would make imports in general more expensive, leading to a lower current account deficit. And the rupee's slide could well reverse, making gold cheaper in the process. Gold remains a riskier option as compared to, say, IIBs. Household financial savings must return to double digits. 18. Why the RBI Governor D Subbarao is wrong on regulating risk Last week, RBI governor D Subbarao spoke for the first time on the Financial Sector Legislative Reforms Commission (FSLRC) report. He focused on one aspect of the draft financial code, systemic risk, and made three points: > The Financial Stability and Development Council (FSDC), chaired by the finance minister, will have statutory status and the responsibility for safeguarding systemic risk. > This runs counter to the post-crisis trend around the world. > In a bank-dominated financial sector like India, the RBI as the central bank and lender of last resort is best placed to do systemic risk regulation and the FSDC should only coordinate. In the field of regulation, three phrases are used: systemic risk, macroprudential regulation and financial stability. Of these, "systemic risk" is the soundest phrase technically. The question of the appropriate regulatory mechanism for systemic risk and the role of government in it have been debated in the last five years. The current RBI Act does not envisage the central bank doing systemic risk regulation. Prior to FSLRC, the Raghuram Rajan Committee recommended the creation of a statutory Financial Sector Oversight Agency (FSOA), chaired by the FM, to work on systemic risk. Later, in 2009, the Advisory Panel on Financial Stability and Stress Testing, constituted by the RBI as part of the Committee on Financial Sector Assessment, recommended formalising the existing multi-agency arrangement.
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FSLRC's positions are spelt out in the FSLRC report and in the draft Indian Financial Code. A careful reading of the two reveals the following. FSDC will run a "financial data management centre", a database on the financial system, similar to what is being done in Canada (by their central bank) and the US (by a Treasury agency). This comprehensive data does not exist in a single place. As a result, systemic risk-thinking in India is quite weak. The reforms will enable FSDC to detect sources of systemic risk. Microprudential regulation requires thinking about one financial firm at a time. As the world discovered during the global crisis, this perspective blinds microprudential regulators to the system perspective. A different agency and approach is required to think about the financial system as a whole, to see the woods and not the trees. The global consensus is that microprudential and systemic risk work should not be within the same organisation. Hence, there are good reasons why the RBI should not be the primary systemic risk management agency: (a) RBI would do microprudential regulation for banking and payments, and (b) RBI is a sectoral regulator for these two sectors and would generally favour them. Under the FSLRC proposal, FSDC does no microprudential regulation, and looks at the full financial system without sectoral biases. Under the draft code, the FSDC secretariat will draft regulations for designating some financial firms as systematically-important financial institutions (Sifis). These can be issued once they are approved by the FSDC board. The FSDC board comprises the FM, RBI chairpersons, Unified Financial Authority (UFA) and Resolution Corporation, and the FSDC chief executive. Thus, the FSDC board is primarily made up of the regulatory agencies. Designation of Sifis is the only executive function envisaged for FSDC in the IFC, one that is a data and research exercise, which looks neutrally at all sectors. So, the FSDC is not a regulator in the standard sense and has no other executive power. Once the regulators and the FM discuss and decide at the FSDC board, individual regulators would implement the decisions. The legal powers come from microprudential law, not systemic risk law. Hence, if one asks, "who would safeguard systemic risk under IFC", the answer is: RBI, UFA, Resolution Corporation, finance ministry and FSDC. It will be acollegial effort, as in most countries. Systemic risk regulation is an evolving field and, hence, IFC is deliberately tentative in this field, unlike a field like consumer protection where the IFC is specific. This humility is appropriate, given how little is known about the
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field. This is a healthy departure from the vague idea that some have, that systemic risk regulation requires a super-regulator, with powers to override all financial regulators. 19. Rupee fall: Indian exporters fret as counterparts in emerging economies gain currency Indian exporters are facing stiff competition from their counterparts in emerging economies such as Indonesia and South Africa, as a sharper fall in their currencies has erased the cost advantage of a lifetime-low rupee. Indonesia and South Africa compete with India in its main export markets— the US and Europe—in textiles, agri-products, engineering goods, electronics and chemicals. Similarly, Thailand is India's biggest rival in the field of gems and jewellery exports, while Bangladesh competes with it for a share of Europe's readymade garments market. On Tuesday, the rupee touched a lifetime low of 58.98 against the dollar, recording a more than 7% fall since May. In contrast, South Africa's rand has depreciated by about 10% against the greenback during the period, while Thailand's baht has slipped by about 7% since April. Indonesia's rupiah, which is witnessing volatility like the rupee, recorded a 1.988% drop on Monday. The Bangladeshi tacca has appreciated 5% against the dollar over the last one month that will give some competitive advantage to Indian garment makers. "With the rupiah and rand depreciating more, the plunge in the Indian rupee is not translating into gains for Indian exporters. In fact, for sectors involving high imports, the benefits have been nullified," said Ajay Sahai, director-general and CEO of Federation of Indian Exports Organisation. According to Sahai, Indian exporters are facing intense competition for new orders from rivals in these countries as they too enjoyed cost advantage due to their currency depreciation. "South African rand has depreciated as much as the rupee, but its import dependence is less in terms of steel, which makes it gain much more in stainless steel and also engineering components to some extent, compared with India. It can be more cost competitive compared to us", said Pankaj Chadha of Jyoti Steel industries. Appreciation in China's yuan has brought some joy, though. Chinese currency has gained 0.6% in value against the dollar this calender. Experts say Indian exporters had the competitive edge and should be able to translate it to their benefit. "India could take the advantage of China's yuan appreciating...Most South East Asian countries dealing with China could switch to India looking to cut their sourcing dependence on China," said Biswajit Dhar, Director-General, Research and Information System for Developing Countries.
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20. Rupee's decline: Commodity imports turn costlier in local market Indian consumers have not been able to take advantage of a fall in global commodity prices due to a weak rupee. Though prices of gold, crude palm oil, soya oil and pulses have dropped in the global market, rupee depreciation has made imports of these commodities costlier in the domestic market. Edible oil is one of the important commodities imported for meeting a growing demand in the domestic market. Crude palm oil, which cost $973 per tonne in June last year, now costs $840 per tonne. "But the full impact of this drop cannot be passed on to the consumer as the rupee has weakened against the dollar, thus pushing up the landed price of edible oil," said BV Mehta, executive director, Solvent Extractors Association of India. He added that importers were working on a margin of 2% -3% and if the rupee devaluates further, there may even be a price hike. In last June, the rupee was at 55.53 as against the dollar. India needs 175 lakh tonne edible oil to meet its annual domestic demand. In the current oil year (November 2012 - October 2013), it is expected that India will need to import nearly 107 lakh tonne oil. In the last one week, the rupee has devalued by 4%. On June 5, the rupee closed at 56.70 against dollar. On Tuesday, the rupee devalued to 58.98 against dollar in early trade to close finally at 58.39. A weak rupee has forced pulses importers to stay away from the market for a while. KC Bhartia, chairman emeritus of All India Pulses & Grain Association, said importers were not placing any orders now. "They are on a waitand-watch mode for the time being. Internationally, pulses price is hovering between $1,200 and $1,500 per tonne, which is somewhat less than last year. But a depreciated rupee will make pulses costlier," he said. India imports around 3-4 million tonne of pulses to meet its annual domestic demand. Pulses are generally imported from the US, Myanmar, Turkey and Australia. "It is an unusual thing that we are seeing now. The government should come up with measures to make the rupee strong. Globally, commodity prices have fallen but prices are ruling high in India," said CP Krishnan, director, Geojit Comtrade. Gold traders and dealers said the government's move to curb imports to strengthen the rupee and bring down the current account deficit has not worked well. Internationally, gold prices have climbed down to $1,370 per ounce from $1,660 per ounce in January. In January, 10 gm of gold would cost Rs 29,800 even though the rupee was at 53.20 level. Today, the price is around Rs 27,700 per 10 gm even
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though international prices have come down by $290 per ounce. "We had told the government that a check on the supply side will not arrest the current account deficit. And that has come true with the rupee devaluating further. The government should immediately take steps to stop the usage of gold as an investment product," said Bachhraj Bamalwa, director, Nemichand Bamalwa and Sons. India imported 864 tonne of gold last year. Kishore Narne, head (commodity & currency), Motilal Oswal Commodity Broker, said movements in domestic commodity markets have largely been due to the volatility in the rupee and global markets are showing signs of nervousness before the German Constitutional Court hearing on the legality of the Outright Monetary Transactions. "European peripheral yields inch higher and with no major data releases, the volatility in currency markets will drive commodities," he said. 21. Arrest that fall: Unleash a new round of reforms to reverse the rupee's slide The official view on the sharp depreciation of the rupee is that this is a temporary phenomenon, that there is no cause for panic. After all almost all developing country currencies have been experiencing downward pressure because the dollar is gaining, with a reviving US economy pushing the Federal Reserve to taper quantitative easing earlier than planned. But the fact is that the rupee is the most battered of the Asian currencies, its broader weakness attributable to India's significantly larger current account deficit. So the government must abandon its business-as-usual attitude and actually create conditions to narrow the deficit, instead of just talking about this. The falling rupee has been a sustained phenomenon for more than two years now, forcing the currency to lose almost a third of its value against the dollar. This has largely been on account of growing trade imbalances, with exports slowing sharply while imports remain shored up by oil and gold. The current downward spiral of the rupee indicates either that trade imbalances continue to widen or that dollar inflows have further softened. But the RBI must desist from intervening to prop up the rupee. The falling rupee is emblematic of our economy's troubles where dollar payments exceed dollar inflows, growth has slowed and inflation grown. Further depreciation may lie ahead. First, this could work in India's favour, helping correct trade imbalances by
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making exports more competitive and imports costlier. Bills for oil and other imported raw materials will also go up unfortunately. But pushing growth rather than imports has to be the priority when fighting back a serious imbalance on the trade front. Second, the scale of the rupee market now makes it increasingly unfeasible for the RBI to influence the exchange rate sustainably. Government should focus on controlling its runaway current account deficit, which would organically strengthen investor sentiment, the economy and the rupee. A number of policy options are available for this. Government could begin by easing foreign investment restraints in retail, insurance, pension funds, defence, energy and other sectors. It could buoy exports by pushing up investments in infrastructure and utilities as well as expediting project clearances. India must exploit the erosion of its currency to regain competitive advantage in manufacturing and exports. 22. In the age of unlimited bytes, Uncle Sam shapes up as Big Brother Some months back, a young entrepreneur of Indian origin co-founded a company that, to oversimplify its expertise, reads your mind. Moninder Jheeta's Silicon Valley-based Expect Labs has introduced an app that can listen to an eight-person conversation, a virtual babble, glean sense from it, and suggest information that speakers may want to see or pursue — even as they are conversing. Jheeta, who is the chief technology officer of Expect, calls it "anticipatory computing". In time, the app can reside in devices ranging from your cell phone to your refrigerator to your car, instantly and constantly crunching data it gathers from around it, including the spoken word or conversations, to provide a stream of contextual information. Already, many US stores and corporations are using such breakthrough technologies to anticipate or capitalise on consumer behaviour. Several large US retailers use a service called Euclid that lets them track individuals' in-store movements through their smartphones' in-store connections, the same way website analytics track your online footsteps when you browse the internet. From airport lounges to theme parks to movie theaters, tracking technologies, embedded and overheaded, are everywhere — in your face and behind your back. Across the US and other digital-savvy parts of the world, they are gathering and generating vast amounts of data. Data, tons of it, is coming from computers, microphones, radio-frequency identification readers, remote sensing
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equipment, and other modes. Data also comes from scientific research — from astronomy and atmospheric sciences to genomics and particle physics. There is an innocuous sounding term for all this. Big Data. And it is getting bigger every day. The world's per capita capacity to store such data has roughly doubled every three years since the 1980s. It is estimated that internet traffic will move up from the current Age of Exabyte (10 raised to 18) bytes to the Zettabyte Age (10 followed by 21 zeroes) in 2015, when 100 exabytes of data (equivalent to 30 billion DVDs) will be generated every month. That's a billion DVDs a day. And these are early days yet in the saga of Big Data. Next up is the yottabyte. Eventually, Big Data will encompass all spheres of activity, human and beyond. Social data relating to humans, including medical records, commerce, security surveillance etc, the kind that has us so agitated today because of its potential misuse, will form only a small part of Big Data, much of it generated by private companies aiming to monetise it. However, it appears the biggest purveyor of this data is government, and none more than the US government, simply by virtue of its role in engendering the internet and many related technologies. As the principal host to the world's internet architecture and infrastructure, the US is also in a unique position to monitor all data passing through it, despite expanding the data pie. News that Uncle Sam is playing Big Brother, and has indeed established a lock over digital data passing through the American gateway, has sent tremors across the free world, including in the US itself, where there is long and healthy distrust of big government. Lost in the rising crescendo of suspicion and disquiet is the fact that governments, including the Obama administration, were just starting to get the hang of big data analytics, especially from government generated data, for problem solving. From spotting outbreaks of disease and infections to better delivery of services, from code enforcement to combating crime, Big Data is enabling things that could not be grasped using smaller packets of information. The growing access of government data to entrepreneurs and innovators, a commitment Washington renewed this year under an open data policy, has already shown spectacular results. Two familiar examples cited by Big Data gurus: public release of weather data from government satellites and ground stations generated an entire economic sector that today includes the Weather Channel, commercial agricultural advisory services, and new insurance options. Similarly, the US government's decision to make the GPS, once reserved for military use, available for civilian and
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commercial access, gave rise to GPS-powered innovations ranging from aircraft navigation systems to precision farming to location-based apps, contributing tens of billions of dollars in annual value to the American economy. So what does the US government do amid such promise? Shoot itself in the foot with an ominous overreach that, even accounting for the hyperbole of privacy advocates, is way over the top. Looking for terrorist activity in big data is clearly a needle-haystack situation. The intrusive US enterprise — even if legal under domestic law — potentially has a more sinister end-use. How to extract the benefits from Big Data while not succumbing to overwrought paranoia will be a challenge in the days and weeks ahead, particularly at a time when privacy is not really prized by GenX. After all, it wasn't too long ago that cellphone numbers were jealously guarded. Now, people lay out their life on Facebook without fear. But to what purpose Big Brother will use all the information he is vacuuming into his vast data farms is something that ought to engage the rest of the world, particularly when the principle actor is a government that is not particularly known for wise decisionmaking in matters of war and peace, and which has a well-chronicled record of marching to folly. So let the Americans know: No data grab. Not on our watch. 23. Bilateral trade slows in 2013; analysts optimistic about long run Mechanical engineering, nuclear power, aviation, metals and precious stones, identified as areas with high potential for bilateral trade. The first four months of 2013 witnessed a fall in bilateral trade between Russia and India with the Russian Ministry of Economic Development putting the number at $3.2 billion, a decline of about 27 percent from the previous year. Financial analysts, however, believe that the two countries are on the right track and have the potential to reach the $40 billion in the next few years. Exports from Russia to India fell by 37 percent in from January to April 2013, while imports actually rose by 12.7 percent. There are two factors that explain the downturn in bilateral trade, according to Narek Avakyan, an analyst with Aforex. There is a general decline in business activity in Southeast and South Asia, and Indian purchases of Russian-made weapons are effectively drying up. ―I am somewhat perplexed by the failures of Russian arms on the Indian market. The two countries have a long history of military cooperation, and India has been purchasing Russian-made defence products for years. Russian military products are some of the most competitive in the world,
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even outstripping the United States. It could have something to do with the desire to cut costs (it‘s well known that European manufacturers are lowering their prices because of the crisis),‖ Avakyan said. Away from the defence industry, Russian exports are suffering because of poor trade routes and reduced economic activity. ―All the same, $15–16 billion in bilateral trade is hardly through the roof for such large economies. In spite of all the difficulties, I believe that trade between Russia and India has the potential to reach $40 billion, and this should happen within the next three to four years, assuming a favourable macroeconomic climate in both countries,‖ Avakyan said. One important factor in bilateral trade is the IndoRussian Bilateral Investment Promotion and Protection Agreement (BIPA), which was signed in 1994. Moscow has requested New Delhi to amend the agreement with clear safeguards to protect large scale Russian investments. ―We actually suggested that our Indian colleagues modernise our current agreement to some extent,‖ Ekaterina Mayorova, a senior official of the Russian Ministry of Economic Development told RIR. ―This agreement was signed in 1994, and since that time our approaches towards concluding agreements on protecting investments have changed several times, and the standard text with which we start negotiations has changed too,‖ Mayorova added. ―Bilateral Investment Promotion and Protection Agreements with various countries, including Russia, are currently under review by the Ministry of Finance,‖ India‘s Minister of State for External Affairs E Ahamed said in May. ―The fall in trade is nothing more than an illusion, as it is largely connected to the fact that India made substantial payments for Russian military goods and services in the first quarter (of last year), giving the impression that bilateral cooperation between the two countries is far less favourable than is actually the case,‖ RBS President and investment expert Timofey Sholtes told RIR. Sholtes believes that trade relations continue to develop at a high rate thanks to active dialogue and coordinated activities. ―The fact that we have a long trade history with Ind ia is certainly important, but we can‘t ignore the fact that each country has its own specific ways of doing business – one country has a high level of corruption, for example, while the other is not exactly transparent with its business processes. This creates some serious obstacles and hinders the development of joint business,‖ Sholtes said. Current state of bilateral trade Russian exports to India currently sit at around $8 billion per year, with imports in the region of $3 billion per year. According to the Ministry of Economic
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Development, the main Russian exports over the first four months of this year were automobiles, machinery and technical equipment. Significantly, their share of the export market increased from 53 percent in 2012 to 57.9 percent in 2013. Exports of pearl and precious stones and metals also increased (from 8.1 percent to 12.9 percent), while decreases were recorded in the supply of chemicals (from 18.2 percent to 5.9 percent) and metals and metal-based products (from 7.8 percent to 4.4 percent). India increased exports of chemicals, textile and footwear to Russia, and provided fewer automobiles, machinery and technical equipment. Analysts like FIBO Group‘s Anatoly Voronin share the general optimism about Indo -Russian bilateral trade. ―There is room for increased cooperation in the military-industrial complex as well as in mechanical engineering, including nuclear power plant construction and the supply of technical and aviation equipment, and pearl and precious stones and metals,‖ Voronin said. ―In return, India can supply medicines (one of the biggest areas), tea and coffee. They can also help set up joint enterprises (investment) in various fields including oil production enterprises such as Sakhalin-1.‖ Sakhalin-1 remains the main Russian-Indian joint investment project on Russian soil, with ONGC Videsh Ltd owning the rights to 20 percent of the production. The main Russian projects in India are the Kamaz truck assembly plant, which opened in February 2010 and the under-construction butyl rubber plant (jointly owned by SIBUR Holding and Reliance Industries), which will have a production capacity of 100,000 tonnes a year. Aviation is another area of strong potential between the countries. A preliminary agreement has been reached with Aviotech on the delivery of ten Sukhoi Superjets to India, with the end users assumed to be Air India and Go Air. The Russian side has also expressed interest in cooperating in the production of individual components for the Irkut MS-21. 24. India and the Boundless Informant It transpires Indians are being spied on by the US‘s top intelligence agency as a nation of naked apes. The Guardian newspaper‘s startling disclosures regarding United States National Security Agency‘s top-secret data-mining tool called Boundless Informant pose a big intellectual challenge for Indian strategists and political class. Simply put, it transpires that we are being spied on by the US‘s top intelligence agency as a nation of naked apes. Just consider that James Clapper, Director of the NIA knows everything that is needed to know about our political class. Our senior politicians – and the elites as a whole – almost without exception use Blackberry; they ―google‖; they do social networking; they converse over
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―Skype‖. Conceivably, the movers and shakers of India‘s power calculus – be it Rahul Gandhi, Narendra Modi, P. Chidambaram, A.K Antony, L. K. Advani, etc. – all depend on the US-based internet servers. In fact, the government has freely distributed iPads to our parliamentarians to improve their efficiency at work. Most certainly, our top intelligence czars and army commanders use cellphones. Conceivably, US knows more about Maoist leader Muppala Lakshmana Rao‘s daily routine than Home Minister Sushil Kumar Shinde does. So, what does it all add up to? Clearly, the damage to national security and our dignity and self-respect as a sovereign nation is incalculable. Yet, President Barack Obama rationalizes the US‘ cybercrime on the world community. He says, ―In the abstract you can complain about Big Brother and how this is a potential programme run amok, but when you actually look at the details, we‘ve [US] struck the right balance.‖ Pray, what is the ―right balance‖? In Obama‘s own words, ―You can‘t have 100 percent security and also then have 100 percent privacy and zero inconvenience. We‘re going to have to make choices as a society. There are trade-offs involved.‖ Obama thinks it is fine that for the US‘ absolute security, it has the prerogative to invade the privacy of the world community. But then, the US also has a deplorable record of double speak when it comes to ―counter-terrorism‖. Didn‘t Headley use a cell phone? Didn‘t he use email? There can be no beating around the bush now that the US didn‘t know anything about what David Headley spoke and did during his numerous covert missions to India for planning the horrendous terrorist strike in Mumbai in November 2008. The Big Brother used the information carefully, discreetly and selectively to the extent that it impacted on the US‘ national security interests. Period. Without doubt, Boundless Informant challenges the very foundations of the USIndia security partnership. India happens to be one of the principal targets in the Boundless Informant‘s ―global heat map‖ where countries are graded in colours – green (for the least amount of surveillance), yellow, orange and red. India is coded orange and out of the total 97 billion pieces of information culled out by the Boundless Informant in March alone, India accounts for 6.3 billion. That works out to around 7 percent of all information being tapped worldwide by the US‘ ace spy agency. It is time our pundits reworked their trade and learned to view the paradigm shift in world politics through the Indian prism. They are focused on China‘s rise – rightly so – but they blithely assume the US and India are ―natural allies.‖ Yet, India is a key target country for the US‘ surveillance. Clearly, the US
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factors in India‘s future potential to become at least half a superpower. Suffice to say, going up the greasy pole is not going to be easy for India, as evident from the reluctance of the world powers to admit it as a permanent member of the United Nations Security Council – or from the Pentagon project to establish a military base in the Maldives so as to replace India as that island‘s provider of security. The Boundless Informant comes as a wake-up call to the effect that what are Beijing‘s woes today from the US‘s containment strategy might as well be Delhi‘s tomorrow if and when India begins to get its act together as a booming economy and world power. Make no mistake that the West hopes to perpetuate the flow of modern history since the Industrial Revolution. That is at the core of the struggle for the control of cyber space. Therefore, don ‘t ask against whom is the US‘s missile defence system being deployed in the Persian Gulf. The Americans may tell the Sheikhs the ABM will ―contain‖ Iran, but its radars and interceptors will also monitor India‘s rapidly growing missile capabilities, which Washington consistently disapproved. The Boundless Informant reminds us that history has not ended.

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