Current Affairs - 9 August 2015

General Affairs

Protestors Came for Cheap Publicity, Says Nitish Kumar After Being Heckled

• NEW DELHI:  Bihar Chief Minister Nitish Kumar was heckled today by a group of nearly 15 people at the inauguration of the New Delhi chapter of the Bihar foundation, when Mr Kumar was speaking at the event to honour people from Bihar for their contribution to society.
  
  The protestors waited for nearly two hours till it was Mr Kumar's turn to speak at the Sri Ram Centre in central Delhi. Some people got up in the middle of his speech and raised slogans about the recent report on Bhagalpur riots and Dalit atrocities in Bihar. They shouted slogans like "Nitish go back" and protested over the deteriorating law and oder situation in the state, before being detained by the Police.
  
  Mr Kumar was unfazed, he said, "This is not a place for politics, whoever wins the elections has to take the people of Bihar along. Phokat mein publicity karne aaye hain (They came for cheap publicity). He carried on with his speech after the protestors were taken away.
  
  Yesterday, the Bihar government had tabled in the assembly, a 1,000-page report on the 1989 Bhagalpur riots with the findings of retired judge NN Singh. The report indicted the ruling Congress government and policemen, "those who had the power to act, abandoned the quest," it said.
  
  On July 27, there were allegations of atrocities being committed against Dalit families after a boy fell in love with a non-Dalit girl in Khagaria district of Bihar.

Tripura Officials Work For Dr Abdul Kalam

• AGARTALA:  Tripura health department officials and doctors worked on the second Saturday of the month to pay their respects to former president APJ Abdul Kalam, who died in Shillong on July 27.
  
  "Today being a second Saturday is an official holiday of Tripura government. But we have decided to do extra work today to show our respect to Dr Kalam," Tripura health services director KL Bhowmik told IANS.
  
  He said the former president was personally involved in different ways with Tripura.  
  
  Dr Kalam after becoming president on July 25, 2002, visited Tripura on October 4, 2002 in the first leg of his visit to north-east India.
  
  During his two-day visit to Tripura, he inaugurated a heart care unit at the Govind Ballav Pant Hospital here, laid the foundation stone for a manufacturing unit of pineapple powder at Bodhjung Nagar industrial estate near here and interacted with the students of various schools and colleges.
  
  Dr Kalam, who was once member of the state planning board, also addressed the convocation of Tripura University on January 31, 2001 before becoming president.
  
  As president, Dr Kalam placed a Tripura artisans' made replica of a bamboo-cane hut with a thatched roof in a corner of Rashtrapati Bhavan. Dr Kalam gave a graphic description of the hut in his book "Turning Points: A Journey Through Challenges".

Government Mulling Free Fodder for Cow Owners: Prakash Javadekar

• NEW DELHI:  The government has plans to provide free fodder to the owners of cows which have stopped yielding milk to prevent them from turning into a burden, union minster Prakash Javadekar said in New Delhi today.
  
  "Farmers feed cow till she produces milk. But when she stops producing milk, they hand her over to the butcher out of financial compulsions," Mr Javadekar, the minister for environment, forests and climate change, said while addressing a conference on cow conservation organised by the Rashtriya Godhan Mahasangh along with the agricultural ministry in New Delhi.
  
  "Farmers love cows, but expenses incurred to feed her when she stops producing milk is a concern. Hence, we are thinking upon how jungles around villages can be utilised in this regard," he added.
  
  Union Home Minister Rajnath Singh, former Karnataka chief minister BS Yeddyurappa and Haryana Agricultural Minister OP Dhankar also attended the function.

Why Naved Is Not Kasab 2

• Terrorism once again reared its ugly head in Jammu and Kashmir this week with an attack on a bus of the Border Security Force, killing two jawans and injuring many more. It wasn't the attack per se that was surprising, because attacks of this nature have taken place in the Valley from time to time over the years, fortunately with declining frequency. In this case, the worrying aspect was the location of the attack - south of the Jawahar tunnel on the National Highway in the Udhampur area.
  
  This was an area that had been freed of militancy and hadn't seen an attack in more than a decade. The National Highway is the lifeline of the Valley, with almost all its needs trucked in using this route. It's the route of choice for a majority of tourists, yatris and security forces as well as the residents of the state. Any vulnerability

Sierra Leone Eases Restrictions as Ebola Danger 'Recedes'

• FREETOWN:  Sierra Leoneans can go to sporting events and nightclubs for the first time in more than a year, after health officials declared there had been progress in rolling back a deadly epidemic of Ebola.
  
  The measures "are no longer deemed necessary at this stage of the fight against Ebola," President Ernest Bai Koroma announced Friday.
  
  However, Koroma warned: "The easing of restrictions is not a sign that Ebola is over. It is not. The risk has receded, but Ebola has not fully retreated."
  
  People in the west African country will now be allowed to attend public gatherings and take part in "general activities", Koroma said.
  
  But the president reminded businesses to continue observing "all Ebola prevention protocols, including temperature screening of employees and customers and the prevention of overcrowding".
  
  Ebola has claimed around 11,300 lives since late 2013, nearly 4,000 of them in Sierra Leone.
  
  In its latest update, the health ministry listed four confirmed cases of the highly contagious hemorrhagic fever nationwide with only two transmission chains.
  
  Nine of the country's 14 districts have not recorded a confirmed case in more than 110 days.

Business Affairs 

Adi Godrej expresses concern over delay in clearance to Goods and Services Tax bill

• Industrialist Adi Godrej has raised concerns over disruptions in Parliament stalling key reform bills, saying that if the Monsoon Session were to be adjourned sine die, then it will raise a lot of question marks on the future.

  "I think the most important thing, if you look at all the bills pending, GST is by far the most important," Godrej told PTI on Friday, when asked about the dilution of the Land bill.

  The government has said in the past that it wants to implement in the Goods and Services Tax from April 1, 2016. Continued protests by Congress members forced a washout of Rajya Sabha proceedings for the third week, stalling passage of the key indirect tax reform.

  "Through the GST, we will have double digit growth in India and everything else will come in line," the Godrej Group chairman said, conceding that the revised draft of the GST,which is billed as a big reform on the indirect taxation front, has a lot of "infirmities".

  "It (current draft) is not a perfect thing. If the perfect draft were to give an 100 points effect (benefit) on the economy, this one will have 80 at least. And in a couple of years, we will have 100. It is very important to pass the GST with a few infirmities rather than not doing it at all," Godrej said.

  On the land bill, where the industry has a reason to be disappointed because of the dilution, the industrialist said it is an issue which has been stuck due to political issues.

  "It is a political issue and difficult to tell. I think they will leave a lot of the implementation to the states. The states will be able to provide the land for the industry," he said.

  A recent media report, citing official response to an RTI query, had said only 8 per cent of 804 stalled industrial projects are stuck due to problems in land acquisition.

  Godrej said things are looking better for the fast moving consumer goods sector, which contributes the most to his group's revenues and added that the company has reported a 13 per cent volume growth in the first quarter.

  Even though fears are being expressed of a slowdown in the rural sector due to poor monsoon estimate, Godrej said his company as well its peers are experiencing a faster growth in rural markets than the urban one.

  The recent fall in commodity prices does give a leg up to his company on the margins front, but a significant part of the advantage will be invested in advertising and marketing spends, he said. The company will continue to invest in factories and will also look at acquisition opportunities, both domestically and abroad, Godrej added.

BHEL Q1 net nosedives 82 per cent to Rs 34 crore on lower sales

• Bharat Heavy Electricals (BHEL), the state-run power equipment maker, has reported a 82.48 per cent plunge in standalone net profit to Rs 33.89 crore for the quarter ended June 30, due to lower sales.

  The PSU firm had reported a net profit of Rs 193.50 crore in the corresponding quarter of the previous fiscal.

  In a regulatory filing, BHEL said net sales during the April-June period were Rs 4,280.76 crore, registering a decline of 15.5 per cent. The company's net sales in the year-ago period stood at Rs 5,067.59 crore.

  BHEL's revenue from the power sector declined to Rs 3,357.13 crore during the quarter from Rs 4,144.16 crore in the year-ago period. "The company has an outstanding order book position of about Rs 1,16,200 crore at the end of Quarter 1/2015-16," the filing added.

  BHEL had signed three agreements with Kazakh companies during Prime Minister Narendra Modi's recent visit to the country. "The first pact was signed with JSC Samruk Energy, the national power utility of Kazakhstan, which has a major share in Kazakh's power sector," BHEL said in a statement last month.

  Shares of BHEL closed 5.48 per cent lower at Rs 266.80 on the Bombay Stock Exchange.

iPhone maker Foxconn to invest $5 billion in Maharashtra

• Foxconn Technology, the world's largest contract electronics manufacturer and a key supplier to Apple Inc, has signed a pact with Maharashtra to invest $5 billion over five years on a new electronics manufacturing facility.

  The announcement was made on Saturday by Foxconn founder Terry Gou and Maharashtra Chief Minister Devendra Fadnavis after the signing of an accord in Mumbai.

  Gou said the facility in Maharashtra will focus on research and development as well as manufacturing, declining, however, to say if the unit would make mobile phones. He said the company chose the state for being a financial centre, availability of quality talent and software-hardware integration facilities. Maharashtra has given the company 1,500 acres land for the plant.

  Gou said Foxconn, the trade name for Hon Hai Precision Industry Co, which also counts Blackberry, Xiaomi and Amazon as clients, was looking for local partners for the facility in the state.

  "Foxconn will create direct employment of 50,000 people through this MoU," Fadnavis said.

  The announcement will bolster Prime Minister Narendra Modi's "Make in India" campaign, which aims to turn Asia's third-largest economy into a manufacturing powerhouse.

  Gou had said in New Delhi on Tuesday that he was looking at setting up manufacturing units in various Indian states and possible partnerships in the world's fastest growing smartphone market. He had said in May that Foxconn was aiming to develop 10-12 facilities in India, including factories and data centres, by 2020.

  Foxconn employs about 1.3 million people during peak production times, making it one of the largest private employers in the world. But it has had to improve labour conditions following a series of suicides in 2010-2011, mostly at its Shenzhen manufacturing operation.

  The company on Friday confirmed the death of an employee at its Zhengzhou plant in China which a labour group said was suicide.

  India could help Foxconn mitigate accelerating wage inflation in China, where it makes the majority of iPhones, and base production sites closer to markets where its key clients want to grow.

  Local businessmen are hoping that as Foxconn and other companies invest in the country, suppliers will follow.

  Gou said the MoU between Foxconn and the state government for setting up the plant follows two months of active discussions during which he met the Chief Minister seven times and a team of 60-70 persons from Foxconn was working on this.

Forex reserves lose shine as gold prices plummet

• Weakening gold prices and a strengthening dollar dented Indian foreign exchange (forex) reserves in the week ended July 31. For the week under review, forex reserves plunged by $187.6 million and stood at $353.46 billion.

  The reserves had reported an increase of $322 million to $353.64 billion in the previous week (July 24). The growth that time had come after four consecutive weeks of decline.

  The data furnished by the Reserve Bank of India (RBI) in its weekly statistical supplement showed that India's forex reserves were negatively impacted by devaluation of gold prices.

  "There was a good build-up in reserves due to the efforts of RBI in buying dollars. The plunge in gold prices washed out those gains," Anindya Banerjee, senior manager for currency derivatives with Kotak Securities, told IANS.

  RBI is pretty active in the forward purchase markets since the last 20-22 months. It sells dollars, whenever the rupee crosses the Rs 64 mark and buys when it falls below Rs 63 to a dollar. Though at a very short range, experts believe that RBI seems to be comfortable with the rupee ranging anywhere between Rs 63.20-Rs 64.30 per dollar.

  The central bank's strong control over the rupee has given the currency strength and resilience to withstand international financial crisis like the recent Greece debt issue.

  Due to RBI's efforts, the foreign currency assets (FCAs) which constitute the largest component of forex reserves, rose by $629.9 million and stood at $329.87 billion. "The FCA grew despite the fact that major global currencies like Euro depreciated against the dollar," Banerjee said.

  Nearly 20-25 per cent of Indian reserves are made up of non-dollar currencies. The individual movements of these currencies against the dollar impacts the overall reserve value.

  "However, the plunge in gold prices had the biggest negative impact on the reserves," Banerjee elaborated.

  The country's gold reserves plunged by $824.2 million to $18.25 billion in the week under review. The reserves were stagnant at $19.34 billion since the week ended May 1.

  Gold reserves in the world's largest gold consuming nation constitute nearly 15 per cent of forex.

  Recently, international gold prices have been steadily declining as the dollar has been getting stronger in anticipation of a US interest rate hike which is due in September. From a peak of $1,900 an ounce in September 2011, the spot gold price slumped to a five-year low of $1,086 an ounce on August 6, 2015.

  Experts say that after oil prices plunged by 50 per cent over the current year, it is now the turn of gold to lose its shine.

  With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) will be led away from investing in commodities like oil or gold and equities in emerging markets such as India. However, the special drawing rights (SDRs) were slightly higher by $4.9 million to touch $4.02 billion.

  The country's reserve position with the International Monetary Fund (IMF) inched up by $1.7 million to $1.30 billion.

China's Moment of Truth

• The Shanghai Composite index declined by almost a third in a month; then it jumped six per cent in a day. Stock markets like to leap and crash, but this is a bit extreme. It caused reverberations because it involves the Chinese economy. It grew at an annual average over 10 per cent from 1979 onwards. Such high, sustained growth is unknown in world history. At its end, China's gross domestic product, valued at the same prices (called PPP in economic jargon), was about the same as that of the United States, which has been the world's largest economy for a century. Its manufacturing value added in 2013 was a third higher than the US's. Indians may not like to dwell on these figures since our economy has been left behind but just in case we feel cheered up by the crash in China's stock market , we should worry about its global impact. The collapse of the US economy in 1929 had such widespread and persistent effects that it came to be known as the Great Crash. Are we about to see a Grand Crash courtesy China?
  

  This is not the first time that the Shanghai Composite has given the world a scare. It rose fourfold in less than a year in 2007/08, and then came down by two-thirds the next year. Shanghai Composite is not China's Dow Jones. In the year preceding the recent crash, Shanghai Composite rose about 50 per cent. Hang Seng, the Hong Kong stock index which is China's other major index, rose about 15 per cent. Shanghai Composite is not representative of the Chinese economy in the same way as Dow Jones is of the US: its stocks cover much less even of Chinese manufacturing, and its investors are relative rookies, not well-heeled, long-term investors.

  The difference reflects the relative importance of stock markets in the two economies. Wall Street is the world's biggest stock exchange, and attracts companies from all over the world. Shanghai does not even list Hong Kong companies, let alone those from the hinterland. Many of China's biggest companies are not listed anywhere; they are owned by the government. And local, unlisted companies are an important component of China's industry.

  But independently of its stock indexes, the Chinese economy has been slowing down. To prevent it, the government made the banks it owns give cheap loans to their individual clients. They used the loans to invest in real estate. As a result, China has seen an unprecedented construction boom in recent years. And they invested some of the loans in shares. That led to the stock market boom in the country - whose end may be nearing.

  However, what matters is the real economy. Its growth is extremely volatile; to draw some reliable conclusions, I have taken four-quarter averages. They are close to 1.8 per cent a quarter or seven per cent a year for the past three years. That is not very illuminating. The savings ratio is equally stable, and equally uninformative. Power consumption in the first quarter of 2015 grew 0.8 per cent over the previous year, residential investment rose 2.6 per cent, while industrial investment fell 0.6 per cent. These are strong indications that China's growth has slowed down.

  Its trade growth shows an even more drastic deceleration. Between 1990 and 2008, China's exports and imports grew at close to 20 per cent annually. After 2008, however, their growth rates came down to nine per cent. This no doubt has consequences within China that are not disclosed by the statistics but they must also have an impact on China's partner countries. China is a dominant market for the exports of some of its neighbours - Mongolia, Turkmenistan and North Korea - as well as for some African countries - Gambia, Mali, Sierra Leone and Congo Democratic Republic. Most of them also receive a high proportion of their imports from China; apart from them, China is a major exporter to Kyrgyzstan, Togo, Benin, Burma, Kazakhstan, Vietnam and Bangladesh. By and large, the countries that are most heavily dependent on trade with China are those in Asia, especially East Asia, and in Africa, especially those with resources of use to China, and those on which its has showered aid.

  The Great Depression was global. It left few nations untouched. A Chinese depression will also be widespread, since its major trade partners are the big economies of the world, especially the US, EU and Japan. But many smaller countries will also be affected, especially China's Asian neighbours, and beneficiaries of its aid. Whether the Sinic depression will be greater or smaller than some other depression is unanswerable since it will depend so much on international policy responses. What is more certain are its geographical dimensions.

  When we look at the picture in this detail, it becomes clear how inadequate the stimuli the Bretton Woods institutions apply in the event of a global slowdown are. Past international downturns emanated from the Atlantic and its industrial countries, and spread to the rest of the world. A Chinese slowdown will affect its own neighbours and clients above all. There was virtually no foreign aid before the Great Depression. It has become a proliferous instrument of international influence today, as colonialism was in the older world. It has been and will be affected by the fortunes and strategies of the great powers. Specifically, Africa and South America have been the arenas of competition for influence between the US, EU and China; China's difficulties cannot leave their client nations untouched.

  

  Taking stock: Are we about to see a Grand Crash, courtesy China?

  China's resurrection had a strong impact on India. As China emerged as an industrial powerhouse, so did India as a net importer of industrial goods. In fact, the pattern of trade between the two replicated the old pattern between industrial and "developing" nations. China became a major investor in other developing countries, while India's foreign investment remains modest.
  

  India's international economic performance has been poor, and not just vis-a-vis China; China's declining prowess will not necessarily improve India's overall economic performance. India's unimpressive performance in world trade and investment is due to misguided policies. Its correction requires that the policies be rethought and redesigned. In particular, Indian governments' penchant for pockets of protection within the country creates weaklings in competition. Its overall competitiveness can be improved only if the government takes a fairer stance towards competition.

  Last year's election weakened one major factor that held India back, namely the inefficient, ineffectual policies of income redistribution embodied in Mahatma Gandhi National Rural Employment Guarantee Programme and the public foodgrain distribution. A further step still waits to be taken, namely greater neutrality of the government towards productive sectors and firms. China's government is only nominally communist except in one respect: it keeps away from private enterprise. The Indian government has generally been too close to the private sector, and has had favourites, such as business houses or the small scale sector.  It will have to abandon this partisanship and force industry to stand on its own feet if it wants to make India a great industrial nation.

  ---

  Ashok V Desai is an economist and former chief consultant to the Ministry of Finance

General Awareness

World Bank released revised classification of world’s economies based on Gross National Income

• • Every year on 1st July World Bank releases data of revised classification of world’s economies based on Gross National Income.
  • Gross National Income (GNI) is a broad-based measure of income generated by a nation’s residents from international and domestic activity.
  • GNI per capita measures the average amount of resources available to persons residing in a given economy, and reflects the average economic well-being of a population.
  • Gross national income per capita ranking table based on the World Bank Atlas method and purchasing power parity (PPP).
  • Economy Coverage :-World, East Asia & Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North Africa, South Asia, Sub Saharan Africa, High income, Low or Middle income, IBRD, IDA
  • Granularity:– National, Regional
  • Number of Economies are 214.
  • It was last updated on 1st July 2015 as like every year by world bank.

  The new GNI per capita ranking Report says:-

  • According to the report, improved economic performance has been seen in many low-income countries like Bangladesh, Kenya, Myanmar, and Tajikistan .
  • Now they became among lower-middle income countries, joining those with annual incomes of $1,046 to $4,125.
  • Mongolia and Paraguay move from lower middle-income status to upper middle-income, a group with yearly income levels of $4,126 to $12,735.
  • South Sudan has fallen out of the lower middle-income classification and back into low-income status, where average per capita incomes are $1,045 or less.
  • Oman and Timor-Leste fell most from their 2013 ranking – down 15 places for both.
  • Maldives and Mongolia were the highest movers in the rankings – up 13 and 8 places, respectively.
  • People living in low-income countries continue to fall behind those in the upper per capita GNI brackets.
  • Malawi has the world’s lowest reported GNI per capita at $250. In 24 years Malawi’s GNI per capita has increased by just $70 from $180.
  • Monaco has the highest, at more than $100,000 – more than 400 times more per person on average than Malawi.
  • Norway, one of the world’s wealthiest countries, has increased its per capita income from $26,010 to $103,050, an increase of $77,040.
  • Vietnam has moved to lower-middle income, with a GNI per capita of $1,890 – moving up more than 50 places in the rankings over the last 25 years.
  • Argentina, Hungary, Seychelles, and Venezuela have now moved from the upper middle income category to high income, with average per capita income levels now of $12,736 or more.

  India’s position:-

  • India belongs to the lower middle income category with average per capital 1610 US dollars or around 101430 rupees, it continues to be in.
  • With the addition of one trillion US dollars during the past seven years, India’s GDP reached 2 trillion US dollar mark in 2014. In 2013 it was 1.861 trillion US dollars.
  • See the complete list of economies classified by income, region, and lending status here:-http://data.worldbank.org/about/country-and-lending-groups