Dec-2010-National

NATIONAL AFFAIRS

Mid-quarter policy review by RBI
In its mid-quarter policy review on December 16, 2010, the RBI announced a one per cent reduction in the statutory liquidity ratio (SLR) of commercial banks from 25 per cent to 24 per cent. The new SLR rates came into effect from December 18.

The apex bank also announced that repo rates and reverse repo rates would be held at 6.25 per cent and 5.25 per cent, respectively. The cash reserve ratio (CRR) of scheduled commercial banks will also remain unchanged at 6 per cent.

The announcement came amidst signs that inflation was showing signs of slowing even as a liquidity concern in the economy was on the rise. The RBI also announced a second auction for purchase of government securities in January 2011, under its open market operation (OMO), to improve banks’ liquidity.

The RBI increased repo and reverse repo rates six times in 2010, in a bid to rein in inflation.

India’s U-turn at Cancun Summit
In an effort to break a deadlock in negotiations to save the planet from overheating, India’s Union Minister of State Jairam Ramesh discarded overnight India's policy of two years on global climate change. It's a move that will likely win India international acclaim, but Ramesh must now prepare for fierce domestic criticism of his new stand that the country is willing to accept legally binding commitments in place of its oft-repeated policy of only voluntary action to cut greenhouse-gas emissions.

"All countries must agree to a legally binding commitment under an appropriate legal form," Ramesh said as he surprised his own negotiators at the 16th Global Climate Summit, held in December in Cancun, Mexico..

The statement was not part of the minister's prepared speech, which he read at the plenary of the UN Framework Convention on Climate Change, as the summit is officially called. The UPA government had assured the Parliament India's position of refusing any legally binding agreements was non-negotiable. Like most developing countries, India had consistently said that since global warming was caused by developed nations, it would only offer voluntary cuts of up to 25%—not of overall emissions but in the intensity of emissions, or reducing the carbon in every unit of industrial production.

Rs 40,000 cr raised via disinvestment in 2010
Having begun 2010 with a wide gap between its income and expenditure, the union government diluted its stake in nine State-owned companies, including Coal India, to raise Rs 40,000 crore that helped cut borrowings.

The amount is the most raised in a year since the government began the programme of diluting minority stake or privatising vast swathes of public sector companies in 1991-92.

The year started with the follow-on public offer (FPO) of NTPC, in which the government diluted its 5 per cent stake and mopped up Rs 8,480 crore. This was followed by the FPO of Rural Electrification Corporation in the month of March. The government offloaded 5 per cent of its stake in the company and raised Rs 882 crore, while REC issued fresh equity of 15 per cent.

In the same month, the government diluted 8.38 per cent of its stake in NMDC through FPO and mopped up Rs 9,930 crore.

The fiscal year 2010-11 started with the initial public offer of Satluj Jal Vidyut Nigam (SJVN) in the month of May.

While the revenue mop up figure of Rs 40,000 crore is for the 12 months ending December 31, the government had targeted raising Rs 40,000 crore through disinvestment in the financial year 2010-11.

Worst Session of Parliament in 25 years
The 2010 winter session of the Parliament can be termed as the worst in the past 25 years of parliamentary history. Disrupted for its entire duration of 24 sittings each in the Lok Sabha and the Rajya Sabha, it ranks at the bottom of the heap among 82 sessions held since 1985.

Both the Houses this time saw protests on the Opposition’s demand for a Joint Parliamentary Committee probe into the 2G Scam. The Resume of Work of the two Houses reveals that the Lok Sabha worked for 7.37 hours, 5.5 per cent of the total available time, while the Rajya Sabha worked for 2.44 hours, just 2.4 per cent of the available time. These percentages are the lowest in 25 years.

The 8th Lok Sabha, despite the Bofors issue (into which a JPC was formed) worked for more than 100 per cent of the available time in 13 of the 14 sessions it saw. In the 13th Lok Sabha also, when issues such as the Ketan Parikh stock scam and the Tehelka expose rocked the Parliament, the lowest percentage of working hours in any session was 59.

If all sessions that sat for more than five working days are compared, the current session recorded the worst performance. Two other sessions that saw low performances were the 10th Lok Sabha in November, 1995, (House sat for 36 per cent of the available time) when the telecom controversy involving Sukhram as the minister came up and the 14th Lok Sabha in June, 2004, when the Opposition accused the UPA of appointing tainted MPs as ministers (namely Shibhu Soren and Lalu Yadav accused in a murder case and the fodder scam, respectively). In that session, the House sat for 33 per cent of the available time.

Visit of Chinese Prime Minister
Prime Minister of China, Wen Jiabao visited India on December 15, 2010. The much-anticipated summit between Prime Minister Manmohan Singh and Chinese Premier Wen Jiabao was rich in symbolism but poor in substance. Belying New Delhi’s expectations, the Chinese leader remained non-committal on reversing Beijing’s policy of giving stapled visas to residents of Jammu and Kashmir or endorsing India’s candidature for a permanent UN Security Council seat.

A joint communiqué issued after the talks suggested few positive outcomes, including a commitment by the two countries to resolve outstanding differences, particularly on the vexed boundary dispute, at an early date through peaceful negotiations.

On the issue of terrorism, the two countries pledged to counter the menace through joint efforts that include disrupting the financing of the menace. They also recognised the need to implement all relevant UN resolutions on the subject, including the one that calls for the proscription of the Pakistan-based Jamat-ud-Dawa (JuD). Although there was no mention of the 26/11 terror attacks, the Chinese leader expressed sympathies with the families of the victims of the Mumbai carnage.

It was quite clear from the communiqué that the Chinese side was keen to deepen the economic content of the relationship rather than dealing with contentious issues of core concern to India. The two countries set a new bilateral trade target of $100 billion by 2015 and take measures to promote greater exports to China with a view to reduce India’s increasing trade deficit.

The positives that emerged from the India-China summit were: the two countries have decided to hold annual meetings at the foreign ministers level, established a hot line between the two Premiers, start a strategic economic dialogue, set up a CEO forum and include the Chinese language in the CBSE curriculum, apart from signing six MOUs in different areas, including one on China providing hydrological data to India on the Sutlej River in the flood season.

"The dragon and the elephant should tango," Chinese Premier Wen Jiabao suggested. He came up with this quip to emphasise the need for the two Asian giants, whose rivalry has been compared to that between the dragon (China) and elephant (India), to come closer.

India and China were partners in cooperation and not rivals, he said. Wen had words of appreciation for his Indian counterpart Manmohan Singh, describing him as a person “with an open and inclusive mind”.

The Chinese leader also mentioned that Cambridge University had brought out a publication containing speeches by him and Manmohan Singh whose common theme was the importance of open and inclusive societies.

India-EU Summit, 2010
On December 10, 2010, India and the European Union vowed to resist all forms of protectionist measures in the global trade as they reached the last stages of concluding a market opening bilateral trade and investment agreement.

After the EU-India Summit, attended by Prime Minister Manmohan Singh and top European Commission leaders, a joint declaration said that the two sides “agreed on the contours of a final package, and reaffirmed the importance of an ambitious and balanced” conclusion of Broad Based Bilateral Trade and Investment Agreement (BTIA).

Billed as the biggest trade opening agreement by the EU, and one of the biggest bilateral pacts ever, the BTIA will reduce duties on mutual trade, which aggregated about euro 56 billion (about $75 billion) in fiscal 2009-10.

While the EU is keen on gaining bigger market for its products in India, Prime Minister Manmohan Singh allayed apprehensions about its impact on the small farmers in India. He further said the two sides should take lead in avoiding protectionist trends, keeping markets open and encouraging the free flow and movement of people.

India has concerns over restrictions of movement of people in several European countries like the UK and Germany. The apprehensions were partly addressed in the joint statement.

Visit of French President
President of France Nicloas Sarkozy visited India on a four-day trip from December 5, 2010. He reached Bangalore on December 5 morning with his glamorous wife Carla Bruni and French officials and business representatives to kick off his second visit to India.

Lauding India’s role in social and economic development programmes in war-ravaged Afghanistan, he said the opening of Afghanistan’s economy, the fight against drug trafficking and the establishment of a secure regional environment demanded the cooperation of all Afghanistan’s neighbours. “India must assume its full role (in Afghanistan) in the process,” he said.

The French President also extended full support to India’s civil-nuclear programme. He said nuclear energy would now form the focus of Indo-French cooperation. Noting that 80 per cent of France’s electricity requirement was met though nuclear power plants, Sarkozy said France’s decision to rely on nuclear energy had proved visionary and ensured its energy independence.

The biggest deal that Sarkozy oversaw during the visit was the signing of the agreement between French nuclear equipment major Areva and the Nuclear Power Corporation (NCP) of India. As per the agreement, Areva is to build two European pressurised reactors (EPR) for NPC’s nuclear power complex scheduled to be built at Jaitapur in Maharashtra’s Ratnagiri district.

From two plants initially, the complex will have six nuclear reactors by 2030. The other big deal to be signed was a $1.2 billion contract to refurbish 56 Mirage 2000 aircraft of the Indian Air Force.

India and France have decided to achieve the trade target of euro 12 billion by 2012, Prime Minister Manmohan Singh said at a joint press interaction with French President Nicholas Sarkozy.

Prime Minister Singh said India would cooperate closely with France, which has assumed the chairmanship of G-20, to push forward the process of global economic recovery, better regulation and financial sector reform.

The joint statement issued by the two sides said the two countries welcomed the significant development of cross-border investments between them and large-scale investment by India-based French companies in the car industry, building materials, electrical equipment, public water utilities and rail transport. They also welcomed prospects of Indian investments in France.

Meanwhile, France said it proposed to invest over euro 10 billion in India in next two years if multi-brand retail and insurance sectors were liberalised even as New Delhi said they were ‘very much’ on government’s agenda.

Visit of Prime Minister Manmohan Singh to Germany
Prime Minister Manmohan Singh visited Germany on December 11, 2010. During the visit, in a stern message to Pakistan, Germany made it clear that terrorism is not a means to solve political problems and this is “unacceptable”.

Both the sides also discussed the possibility of entering into bilateral cooperation in civil-nuclear energy. If it crystallises, Germany will follow the US, France and some other countries for civil-nuclear cooperation with India.

Both leaders said India and Germany would work hard together to advance UN Security Council reforms for expansion of both permanent and non-permanent seats.

The two sides also agreed to enhance bilateral trade from the present level of 13 billion euro to 20 billion euros by 2012.

Germany is India's largest trading partner in the 27-nation European Union, with bilateral trade growing in the recent years to reach 13.4 billion euros in 2008.

Bilateral trade decreased marginally to 13.09 billion euro, but has revived and is growing by over 15 per cent and reached 9.8 billion euro during January-August, 2010.

Visit of Russian President
India and Russia inked more than 30 accords, including one on joint designing of the fifth generation fighter aircraft and another on expanding nuclear cooperation, during President Dmitry Medvedev’s visit to India on December 20, 2010.

From Afghanistan to co-producing a fifth-generation fighter jet at a cost of $30 billion and sharing military signals from a satellite navigation system, India and Russia returned to the familiar comfort of their extraordinary past, with the promise to add new areas of cooperation in the hydrocarbon sector, as well as take forward discussions in the area of civil nuclear energy.

Topping the chart of 30 agreements was one on enhancing cooperation in the oil & gas sector, memoranda to fight illegal immigration and simplify visa procedures, as well as a design contract for a fifth-generation fighter aircraft.

Working towards the civil nuclear cooperation, the two countries inked an accord under which Russia would set up two more 1,000 MW units at Kudankulam.

Medvedev’s visit to India brought the curtains down on a particularly busy diplomatic season in which Delhi, over a period of six weeks, played host to four of the world’s most powerful leaders.

As the US broke new ground with India in recent years, especially on the back of the nuclear deal with New Delhi, the partnership with Russia seemed to slag. But the strategic orientation of India’s foreign policy, with energy security and concerns around terrorism at the core, have had the effect of turning its head towards Moscow once again and finding that Moscow would also like to reciprocate.

For several years, for example, Russia has not wanted to discuss Afghanistan with India, but with NATO-ISAF forces now publicly announcing their decision to withdraw by 2014, Moscow realises that it must forge a new conversation around this subject, especially since both Russia and India are victims of both terrorism and drug-dealing.

It’s clear too that Russian Prime Minister Vladimir Putin is driving this return to a revivified relationship at Moscow’s end, while in New Delhi a variety of factors are combining to persuade the Indian establishment to look anew at this old friendship.

One reason is that Russia remains India’s oldest partner in the civil nuclear and defence sectors. Despite New Delhi’s intention to diversify and buy armaments from the West, especially the US, Russian offers to share information and technology in its satellite navigation system GLONASS are both “unique and unprecedented”.

The agreement on the exploitation of the hydrocarbon sector, as well as a separate one between ONGC Videsh and Russia’s Sistema, is an example of how both countries are now hoping to jointly exploit their natural resources.

As for discussions on civil nuclear energy, which have hit a road-bump with the passing of the nuclear liability law, both sides are keen that such legislation does not come in the way of Russia expanding its presence in India’s civil nuclear sector.

The Indian side reassured the Russians that the “international convention” on nuclear matters, such as the 1963 Vienna Protocol, would take precedence in any dispute following a nuclear accident on the question of supplier or operator liability.

One major drawback of the Manmohan Singh-Medvedev summit was its inability to forge a concrete roadmap to revive the economic relationship, although a couple of MOUs were signed on promoting pharma and IT-related services.

Investment in each other’s countries is an abysmal $1 billion each, while trade remains at a lowly $7.5 billion. Even the target of increasing trade to $15 billion by 2015 is modest at best.

TRAI cracks whip on telemarketers
Hardening its stand against telemarketers who violate guidelines, the Telecom Regulatory Authority of India (TRAI) has decided to impose a hefty penalty of up to Rs 2.5 lakh if they call a mobile subscriber registered for not receiving commercial calls.

The penalty is a staggering 250 times the earlier maximum stipulated penalty of Rs 1,000. The minimum penalty was only Rs 500.

Under the revised guidelines, a telemarketer will be fined Rs 25,000 for a first offence, rising progressively to Rs 2.5 lakh for a sixth offence, following which its number will be blocked by all service providers, TRAI said. The new regulations became from January 1, 2011.

Telemarketers will also be issued a series of 70 numbers to help subscribers recognise commercial calls. Similarly, a unique SMS header has also been mandated for easy identification of commercial SMSs. No commercial communication, even for unregistered customers, will be permitted between 9 pm and 9 am.

Subscribers already registered with the National Do Not Call Registry will not be required to register again. Streamlining the registration system, customer registration will now be effective within seven days, compared with the earlier 45 days.

A new option is the ability of a subscriber to choose the degree of call filtering, based on categories of interest. The categories are: banking & financial products, real estate, education, health, consumer goods, automobiles, communication & entertainment, tourism and leisure.

To register complaints, a customer can call 1909. A complaint can also be registered via SMS.

Transactional messages such as those from banks, insurance companies, telecom service providers, airlines and railways are excluded from the new restrictions. Transactional messages will, however, only be in the form of SMS and restricted to relevant information. Promotional content in transactional messages will not be permitted.