Arab Spring

The term spring is coined as rebellion or uprising; here it means the recent revolts in the Arab regime in the quest of democracy.

New Delhi has a golden opportunity to assist in supporting democratic regimes in the Arab World.

The fall of Libya’s Muammar Gaddafi is the latest, most dramatic event in the explosive changes roiling today’s Middle East. As Libyans and their counterparts in Egypt, Tunisia, Yemen, and elsewhere—start down the difficult path of political change, India possesses a great opportunity. In recognition of its growing global role and its status as the world’s largest democracy, India can play a unique role in supporting the democratic forces that have produced the Arab Spring.

India had voted earlier in the year with other great powers on the UN Security Council to sanction Libya following Colonel Gaddafi’s brutal crackdown and New Delhi’s posture toward developments in countries like Syria and Iran are of increasing consequence for decision-makers and publics alike.

New Delhi hasn’t just a moral stake, but also a national interest in building on this record in the new Middle East to state Egypt, Tunisia, Libya, Yemen, Syria, and the Gulf states will need to establish the institutions of good governance, from strong political parties to independent judiciaries. New Delhi’s advice and assistance would make these countries better homes for Indian workers, better allies in stabilizing a region of great strategic importance to India’s development, more reliable energy suppliers, and more prosperous trade and investment partners.

The governance crisis in the Arab world presents an opportunity to strengthen US-India ties as well. Whether working independently or together with India on similar ends, the world’s largest democracies bring complementary strengths to the hard task of building a culture of democracy across the Arab world. 

By Arjun Chaudhuri

Weekly Digest

Govt admits $9 bn export gaffe

Fears about exports being shown on the higher aspect have come true with the govt. conceding today that it goofed up because the} numbers got inflated by USD $9 billion during April-November period of the fiscal.

Commerce Secretary Rahul Khullar  said that, There wasn't only mis-classifications but also "error in double counting and all kind of things" because of issues in the computer software which was recently upgraded. Having admitted mistakes, Khullar said that at least now "the notion that the govt is deliberately cooking up and telling lies...has got to stop.

The mismatch came about mainly because of over-estimation of engineering export, the growth of which had baffled economists as it was not in tandem with the growth of industrial production during the period.

While the index of industrial production (IIP) stood at 5 per cent for the April-September period, exports grew by 52.08 per cent during the same period.

Experts though, aired concerns over the veracity of the export data and the government had summarily brushed aside their arguments. “There was a misclassification of goods ... notwithstanding the misclassification, there were also errors like double counting and all other sorts...

Food inflation falls sharply to 6.6 percent

Food inflation has dropped sharply in the last one month giving the much needed relief to common people and the policymakers who have been struggling for almost the last two years to control the general price rise.

Onion became cheaper by 39.20 percent during the week under review, while price of potatoes declined by 15.75 percent. Wheat became cheaper by 4.70 percent year-on-year and price of vegetables dropped by 1.25 percent, according to data released by the commerce and industry ministry. The primary articles index, which has a 20.12 percent weightage in the wholesale price index, dropped to 6.92 percent for the week under review as compared to 7.74 percent in the previous week. It as at 10.39 percent for the week ended Nov 5.

The fuel and power index remained unchanged at 15.53 percent. The headline inflation based on the wholesale price index was recorded at 9.73 percent in October, according to the latest official data.

The Reserve Bank of India (RBI) has hiked key policy rates 13 times since the beginning of 2010 to control the price rise. The recent decline in inflationary pressure may give some comfort to the economic policymakers who have been struggling to control the price rise for the last two years, without much success.

The following are the yearly rise and fall in prices in the week under review of some main commodities that form the sub-index for food articles:

Onions: (-) 39.20 percent

Vegetables: (-) 1.25 percent

Fruits: 10.72 percent

Potatoes: (-) 15.72 percent

Eggs, meat, fish: 10.04 percent

Cereals: 1.68 percent

Rice: 2.34 percent

Wheat: (-) 4.70 percent

Pulses: 13.00 percent

CRISIL Research cuts 2011-12 GDP growth to 7.0%

Ratings agency Crisil on Thursday lowered its growth forecast for the Indian economy in 2011-12 to 7 per cent, from the earlier estimate of 7.6 per cent, due to global slowdown and weak domestic investment climate.

Crisil said said economic growth in the second half (October-March) of the current fiscal is likely to slip to 6.7 per cent, from 7.3 per cent in the first six months.

"This will restrict the overall GDP growth for 2011-12 at 7 per cent. This would be the second-lowest growth in the past nine years after 6.8 per cent in 2008-09, during the peak of global financial crisis," the report said.

The country's Gross Domestic Product (GDP) growth slipped to 6.9 per cent in the second quarter, the lowest in over two years.

The economic growth in 2010-11 stood at 8.5 per cent. Growth in eight core infrastructure industries dipped to 0.1 per cent in October, the lowest in five years.

RBI has already revised its growth projection for the Indian economy to 7.6 per cent, from 8 per cent earlier.

Finance Minister Pranab Mukherjee said last week that GDP growth in the current fiscal is likely to be around 7.5 per cent, far below the 9 per cent projection made by the government in its pre-Budget survey.

Crisil said, "The industry growth will remain constrained by lagged impact of RBI's interest rate hikes, weak exports due to slipping demand, particularly from Europe and growing bottlenecks in the mining sector,"

De-Jargonize

»   Bank run (run on the bank) – this is a crisis faced by banks when customers and investors feel the bank has become insolvent and cannot pay of its debts. The customers then tend to remove all their deposits from the bank which trips the bank towards bankruptcy and is called as run on the bank. Argentine crisis of 1999-2002.

»  Banking Panic- occurs when multiple banks simultaneously are facing bank runs hence triggering a collapse of faith in the banking system. This was one of the major reasons for the great depression of 1930’s.

»    Acid test (Quick Ratio) - is understood as on any given day the ability of the firm to clear its current liabilities. Hence cash or cash equivalents and highly liquid current assets are used e.g cash, marketable securities.

» Factors of Production - are any commodities or services used to produce goods and services. 'Factors of production' refers specifically to the primary factors, which are stocks including land, labor (the ability to work), and capital goods applied to production. The primary factors facilitate production but neither become part of the product (as with raw materials) nor become significantly transformed by the production process. Apart from the basic 3 factors human knowledge and state of technology are also considered factors.

»    Slippage – It is the difference between estimated transaction costs and the amount actually paid. Brokers may not always be effective enough at executing orders. Market-impact, liquidity, and frictional costs may also contribute. Algorithmic trading is often used to reduce slippage.

»    Golden Share – is an absolute share in terms of voting rights which is able to veto all other shares, generally held by government organizations.

»    Squeeze-Out - in a joint stock company a large group of share holders force a removal of other shareholders by giving them a cash compensation in exchange for their shares.

»    Iceberg Order – occurs when investors divide a large single order into smaller lots so as to hide their order quantity and by ordering those lots at different times can reduce price movements occurring due to the heavy demand or supply

»    To do a ‘Haircut’ – is when traders exchange at a price and re-exchange at a very small spread to insure higher returns as the trading is done in huge volumes.

»      Champagne Stock - term used to describe a stock that has appreciated dramatically. A champagne stock is one that has made shareholders a great deal of money. Usually seen in bubbled up stock such as the dotcom bubble of 2000’s

»      Bear hug - An offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. usually made when there is doubt that the target company's management will be willing to sell.