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Indian Current Affairs by : ramkyc
Preparing you for current affairs questions in competitive examinations
Updated: 9 hours 35 min ago
17.03.2010
Finance & Economy
- On how different countries (in Asia) fared in opening up their retail sector
- Taiwan opened up its retail sector to foreigners in the 1980s without creating a regulatory environment for the emergence of a strong retail sector. Predictably, foreign companies dominate Taiwanese retail today. In contrast, Japan’s distribution networks and regulatory environment have been inhospitable to foreign retailers and the Japanese pay today for this absence of competition with some of the highest retail prices in the world.
- South Korea and China managed the process of foreign entry more gradually, initially encouraging joint ventures between domestic and foreign retailers before looser regulations on FDI in retail were brought in. Both countries now have the benefit of a vibrant domestic retail sector, and the competition between domestic and foreign retailers has yielded low prices and good service.
- India is already following China’s example, initially encouraging joint ventures between domestic and foreign retailers before allowing 100% FDI in organised multi-brand retail. This gradual opening up should preserve a vibrant domestic retail sector in the long term, and provide India with a solid foundation of domestic expertise and human capital.
- What strategies should retailers pursue for long term success in markets like India?
- First, build capabilities and backend logistics infrastructure. Domestic firms should partner with established foreign firms to capitalise on combining foreign retail knowhow with domestic market knowledge. Over time, these joint ventures will dissolve but both the domestic and foreign firms will have the capabilities to establish successful retail businesses independently. While the government is rapidly investing in transportation infrastructure, organised retailers should either invest in their own supply-chain infrastructure or promote intermediaries that develop and invest in cutting-edge supply-chain infrastructure.
- Second, learn local and regional preferences in developing the merchandising mix. ‘One size fits all’ is not a winning strategy. Merchandising correctly in a diverse country such as India takes time, trial and error, and is critical for success.
- Third, to deal with the kirana challenge, organised retailers should actively engage customers and local political leaders, to demonstrate the value of their retail enterprise, especially in the context of political challenges from kirana lobbyists. For example, Bharti has created a retail academy to train thousands of people in Punjab. Creating thousands of jobs over time develops a political constituency of employees.
- Idea in soup over 'paperless' ad
- Mobile services operator Idea Cellular’s ‘use mobiles, save the planet’ campaign (you might have seen it on TV), starring Abhishek Bachchan, has landed in a controversy, with the Indian Paper Manufacturers’ Association (IPMA) dragging Idea Cellular to the Advertising Standards Council of India (ASCI).
- The IPMA alleges that the Idea commercial, which is aimed at weaning people away from paper to the electronic medium, is ‘pitching against the usage of paper and damning the industry as a whole for adversely impacting the environment.’
- Idea Cellular, on the other hand, maintains that its ads promote conservation and that none of the situations depicted in its ‘save paper’ commercials are real and that it has great respect for the paper industry.
- However, Idea is reportedly taking this ad off air. Though it says that the withdrawal is not on account of the objection but as per schedule, it is sure to cool the tempers down.
- Government wants banks to exit insurance?
- This appears so from this news report.
- The main idea behind the government's move appears to be that it wants banks to remain in banking rather than expand into other areas of finance like insurance, mutual funds etc. This is in the context of the fact that the concept of universal banking or the financial supermarket model that has defined global banking groups such as Citi or the Royal Bank of Scotland for years has been severely tested.
- How is it that the government is in a position to dictate to banks as to where they should go and where they should not?
- Its power comes from the fact that it is the largest shareholder in many a public sector bank -- holding about or more than 51% equity.
- The stress on capital adequacy norms is forcing the banks to approach the central government to infuse more capital into them. The government has already committed to provide Rs 16,500 crore in capital support to state-run banks in 2010-11 to be complaint with capital adequacy norms. It estimates that state-run banks will need another Rs 38,000 crore in capital over the next two years.
- Government jittery response has much to do with the fact that India’s life insurance industry posted a combined net loss of Rs 4,878.49 crore in 2008-09, up 43% from a year ago. Of 22 life insurers, only four have reported profits. An insurance venture needs a minimum startup capital of Rs 100 crore and has solvency margins of 1.5% of the total sum assured. Life insurance companies put in nearly Rs 6,000 crore into their ventures in 2008-09, while non-life companies brought in Rs 6,228 crore.
- What is the issue between Google and China?
- Google has been operating google.cn, a search engine meant for Chinese speaking people since 2006.
- China requires Internet operators to block words and images the ruling Communist Party deems unacceptable.
- China demands that Google should respect its censorship laws. But Google accuses China of hacking its sites with an intent to bully the search engine giant.
- Google in January said it may exit China pending talks with the government on a plan to stop censoring search results in its Google.cn site, after claiming it was targeted by cyber attacks from within the country.
- The height of this tiff is that China demands that Google should respect its censorship laws even if it exits China.
- Global credit markets on debt row
- Is another global disaster staring us in the face? Looks like so.
- 2012 is the beginning of a three year period in which more than $700 bn in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could create a glut in the debt markets. With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.
- The US government alone will need to borrow nearly $2 trillion in 2012, to bridge the projected budget deficit for that year and to refinance existing debt.
- How is this coming about?
- Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.
- That is because the record number of bonds and loans that were issued to finance those transactions typically come due in 5-7 years. In addition, many companies whose debt matured in 2009 and 2010 have been able to extend their loans, but the extra breathing room is only adding to the bill for 2012 and after.
- The result is a potential financial doomsday, or what bond analysts call a maturity wall. From $21 billion due this year, junk bonds are set to mature at a rate of $155 billion in 2012, $212 billion in 2013 and $338 billion in 2015.
- As was the case with the collapse of the subprime mortgage market three years ago, derivatives played a big role in the explosion of risky corporate debt. In this case, the culprit was a financial instrument called a collateralised loan obligation, which helped issuers repackage corporate loans much as subprime mortgages were sliced, diced and then resold to other investors. That made many more risky loans available.
- Are all foretellers gloomy?
- Not everyone is convinced that 2012 will spell catastrophe for the junk bond market. Optimists note that investors seeking high yields snapped up speculative-grade bonds last year and early this year, and that continued demand will allow companies to refinance before their loans come due.
- The scenario points to companies with a lot of debt competing with a raft of better-rated borrowers that are expected to seek buyers of their debt at around the same time. Chief among those is the best-rated borrower of all: the US government. The Treasury Department estimates that the federal budget deficit in 2012 will total $974 billion, down from this year’s $1.8 trillion, but still huge by historical standards.
- Some estimates say that Washington will actually have to borrow $1.8 trillion in 2012, because $859 billion in old bonds will come due and have to be refinanced in addition to the deficit. By 2013 and 2014, $1.4 trillion will have to be raised annually.
- Next in line are companies with investment-grade credit ratings. They must refinance $1.2 trillion in loans between 2012 and 2014, including $526 billion in 2012.
- Finally, there is the looming rollover of commercial mortgage-backed securities, which will double in the next three years, hitting $59.7 billion in 2012.
- Even if most of the debt does get refinanced, borrowers may have to pay more, if heavy government borrowing causes rates on Treasury debt to rise. Those higher rates would trickle down through the credit markets, hitting the weakest companies the hardest.
- smithereens: Noun
- A collection of small fragments considered as a whole
- eg: If only the Maoists would step aside, in peace or at the point of a bayonet, the state would take care of the poor. This claim would be blown to smithereens if the state were to facilitate a classic case of development that impoverishes a defenceless populace, perhaps to extinction.
- sidestep: Verb
- Avoid or try to avoid fulfilling, answering, or performing (duties, questions, or issues)
- eg: Europe's blueprint for a financial lifeline to Greece amounts to an unprecedented bet by finance ministers that they can avert a euro crisis by sidestepping the no-bailout rules intended to sustain the 11-year-old currency.
Read More.... 17.03.2010
16.03.2010
Politics & the Nation
- Let's take stock of the women's representation in state legislatures and parliament
- And then also look at one solution that is offered as the best method of giving adequate representation to women.
- In last year’s Lok Sabha elections only 7% of the contestants were women. Despite that, they made up 11% of the winning candidates.
- In the 18 bigger states, there’s a total of 3,463 elected lawmakers; only 293, or 8.4%, are women. Uttar Pradesh with only 6.4% women lawmakers lags below the national average, but Bihar with nearly 11% women legislators is far ahead.
- The South is often portrayed as more progressive than the North, but the Karnataka legislature has only 2.2% representation of women. Kerala is even more shocking. The state has some of India’s best social indicators, comparable to the best in the world. But it fares miserably when it comes to giving women a say in lawmaking: only 4.9% of its lawmakers are women.
- The best way to reserve a third of the seats for women, probably for ever, without creating political heartburn is to increase the total number of Lok Sabha and state assemblies by 50% and reserve them all for women. This won’t need any rotation, single term or otherwise, because the total number of seats would have gone up to create the reserved constituencies. It will also make sure that constituencies whose population has gone up dramatically in the 30-odd years since this exercise was last undertaken, get represented better.
- For a good listing of all that is bad or touchy with the present Women's reservation bill, log in to this article that appeared in today's ET.
- Foreign Universities may set up shop in India
- India moved another step closer towards hosting campuses of foreign universities, with the Cabinet clearing a long-pending legislation, which the government described as a milestone that will enhance choices, increase competition and benchmark quality.
- The move was welcomed by domestic private players in the education sector, and foreign universities, too, lauded the effort, but many of them said they had no immediate plans to set up campuses in India.
- What is the assessment right now about the measure?
- Some big US and European B-schools have tapped overseas markets like Singapore and the Gulf and are unlikely to make a major foray into India right now. However, others like pension funds may look at setting up new institutes here, or investing in existing ones
- Some issues such as regulatory framework to look into dual degrees, portability of credits have not been addressed in the bill in a big way. Hence, some foreign colleges looking forward to partnership models will now be forced to wait longer for their Indian foray
- Bill not very clear on globalisation of Indian curriculum that would have helped Indian institutions offer more globalised courses
- Move will make Indian institutions more competitive and lead to better quality of higher education in the long term
- What is the cause behind food inflation?
- This ET editorial argues that it is basically the MSP announced by the government that is the real culprit. Take a look. So what's the solution for farm nirvana?
- The right approach is to not to give farmers ever-rising prices and subsidies but to facilitate their shift out of agriculture through massive provision of rural infrastructure and liberalised labour laws that encourage the hiring of workers. This will allow the average farm size to quadruple. That will be a better longterm source of farm prosperity than high MSPs.
- What is the best pricing model for natural gas?
- It is a given for scarce commodities to have administered prices. But when the scarcity situation slowly improves -- as is happening in the case of natural gas in India -- what should be the ideal pricing model?
- One of the currently proposed pricing models is pooled pricing regime (PPR), close to traditional administered pricing mechanism (APM) and proposes pooling all (or categories) of the gas sources and arriving at uniform gas prices. APM was applicable for supplies from the government-nominated companies (PSUs) and required larger government intervention to manage the same.
- Within the PPR, prices can be further sub-pooled to consider “origin” disparities of gas supplies. Deep water gas supplies, for example, have higher cost of production (both capex and opex) and cannot be priced at the same levels as an onshore gas supply. Such sub-pooling, however, would also mean that gas pricing is cost based, which will, given the high initial exploration risks associated with upstream investments, deincentivise upstream players.
- Whether or not PPR is a best pricing model can only be known with the passage of time. Also take a look at this article in full. It discusses a couple of other models that are in existence globally.
- What is the solution to China's continued undervaluation of its currency?
- Take a look at Paul Krugman's recommendation:
- He says that the US should impose a temporary surcharge on imports from China.
- What can this do?
- Back in 1971 when the US did impose a 10% surcharge on imports from Germany, Japan and a few other nations, the nations had to raise the dollar value of their currencies.
- Such a move is strongly required now feels Krugman. Only that he is recommending a steeper 25% surcharge because estimates of renminbi undervaluation range from 20 to 40%.
- Greek? Read this in English.
- How do countries invest in IMF's debt?
- Take a look at this ET in the Classroom column. It explains the issue very well.
- Ever bothered to know the economics behind IPL?
- IPL is reportedly raking in money for the BCCI. Take a look at these snippets to get an inkling of the moolah:
- Tyre company MRF joined the IPL brandwagon by sponsoring the blimp, a balloon that floats over the stadium, in a deal said to be worth Rs 15 crore a year.
- Multi Screen Media, the owner of SET Max, along with World Sports Group, paid around Rs 8,200 crore for exclusive broadcasting rights for nine years after the deal was renegotiated during the last season.
- Three-year deals with internet giant Google and general entertainment channel Colors inked in January are worth at least Rs 80 crore and Rs 100 crore, say people from the media and entertainment space.
- IPL has reportedly sold the theatrical rights (for 10 years) to Entertainment Sports Direct for Rs. 330 crores.
- But the IPL governing council is hazy on sharing with franchise owners the proceeds from the theatrical rights sale, the deal to broadcast IPL matches live on YouTube and the Colors deal to air shows based on the cricket format.
- Currently, the broadcasting rights and central sponsorship earnings are shared with the eight teams with IPL keeping 20% of the broadcasting money and 40% of the central sponsorship pool.
- Take a look at this graphic to get more clarity.
- Know what does RSVP stands for?
- It is usually written at the back or bottom of the invitation cards inviting you to a party or special occasion.
- The invitees are expected to respond to the host by confirming their participation or expressing their inability to participate in the gathering. It is a given that in India people care less about such niceties. Or so I thought till I read this engaging article in today's ET.
- Now that we have company even from the so called advanced nations, we can take comfort.
- scrum: Noun
- (rugby) the method of beginning play in which the forwards of each team crouch side by side with locked arms; play starts when the ball is thrown in between them and the two sides compete for possession; [Brit] A disorderly crowd of people
- eg: The Board of Control for Cricket in India, or BCCI, was counting its chickens well before a single ball was bowled at the third season of the Indian Premier League, or IPL, thanks to a scrum of brands rushing to cricket’s greatest spectacle.
- epithet: Noun
- A defamatory or abusive word or phrase; Descriptive word or phrase
- hangdog: Adjective
- Showing a sense of guilt; Frightened into submission or compliance
- eg: ...This irked missive flushed out a final 10 hangdog respondents.
Read More.... 16.03.2010
