Fiscal deficit, poor infrastructure constraints for India’s ratings upgrade -  Click to Download

Fiscal deficit, poor infrastructure constraints for India’s ratings upgrade:

Atsi Sheth Vice President, Sovereign Risk Group, Moody's Investors Service Inc,

ET Now: Firstly, a word on how the data from India is looking like. We have seen the IIP figures and yesterday, we saw the inflation numbers as well to be as high as 7.5%.

Atsi Sheth: Certainly, like you said, the inflation is still high. It was expected to abate slowly, but that is clearly not happening. At the same time, growth which was expected to pick up seems to be stuck at a fairly low rate. The IIP figures tell you that industrial growth clearly has not been picking up yet and we expect it to persist for the next couple of quarters.

ET Now: So it is a tricky time right now for India. We have got the big general elections next year and the macroeconomic situation does not seem to be quite improving. How would you, as a ratings agency, analyse India now and what could trigger a ratings upgrade, according to you?

Atsi Sheth: There are two key constraints that keep India's rating at BAA3. One is the fiscal position of the government. That fiscal deficit in India is really much higher than similarly-rated countries.

So if that fiscal position were to improve -- we do not expect it to -- that would be positive for the credit profile and the rating and the other constraint that we see on India's credit profile is the infrastructure position. India has enjoyed a very high growth rate over the last decade and even now it is growing at 4.5%-odd. India's growth is actually above that of emerging markets.

However, given its infrastructure position, whether it is soft infrastructure like education, skill set and so on, or hard infrastructure like roads, ports and others, India does not compare very well with competing emerging markets and we think that if that were to change, that would be a cause for an upgrade, because that would really free up the potential growth rate for India over the longer term. So those are the two things that we are watching.

ET Now: There has been quite a bit of improvement on the CAD and trade deficit fronts, as well as on the outstanding FII position in the debt market. How do you think we will react if indeed tapering is announced tomorrow?
 

Atsi Sheth: If this is a question specific to India, you are absolutely right that the macroeconomic fundamentals in one sense have improved dramatically from May and this is clear in the current account deficit, which is much narrower than it was then.

However, there are a couple of uncertainties which you yourself have alluded to. One would be the elections that are coming up and that will affect capital flows into India over the next couple of quarters. So the tapering announcement might have a different impact on India than other emerging markets, depending upon how the political scenario is analysed.

The second aspect is inflation. If India's inflation remains high, the market will anticipate growth to probably suffer over the next year as well and that might affect capital flows into and out of India. Hence those are the two things, specific to India, that might affect it in addition to the current account deficit over the next couple of quarters.
 

ET Now: So what happens to the currency? Do we remain stable as is the case right now, or do you think we could again head back to the lows that we have come out from?
 

Atsi Sheth: Our forecast is that it will remain at current levels. There might be some event-driven volatility. That could be a global event like an announcement related to tapering or a domestic event like an announcement related to the elections, but our forecast is that the currency will remain around current levels. We certainly do not expect a dramatic appreciation over the next two quarters, nor do we expect a dramatic depreciation at this point.

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Entering India a challenge for MNCs - Click to Download

Entering India a challenge for MNCs

Deutsche Asia-Pacific Co-CEO Gunit Chadha

Gunit Chadha is a member of the Global Group Executive Committee of Deutsche Bank AG and co-CEO for Asia Pacific. Recently in India, he spoke to TOI about the evolving economic situation. Excerpts:

How do you see the global economic situation?

The US will be a key driver as it should grow from 1.8% in 2013 to 3.2% in 2014 on the back of growing retail confidence , uptick in housing and shale gas impact on manufacturing . Europe still has some way to go on its fiscal adjustments . We are constructive about China, projecting 8.6% growth in 2014, around the recently announced marketoriented reforms. Put together , while risks remain, global growth should accelerate to 3.7% in 2014 from 2.7% this year. So, 2014 may be around US growing, Europe stabilizing , China re-balancing and India recovering.

Is uncertainty holding investors back from pumping money into India?

Not really. Last year, FIIs invested $25 billion into equity markets. This year they're on track to do close to that number . Similarly, last year, India attracted $15 billion in net FDI. This year net FDI has already surpassed last year's levels in the first nine months. India can get more FDI. Debt investors put $8 billion into India last year, they pulled it out this year.

But companies such as Walmart and BHP Billiton have recently announced plans to scale down operations in India. Are they over pessimistic?

Entering India has been very challenging for MNCs, but staying invested and growing as a franchise is much more promising and profitable. As the world competes for global capital and jobs, India must attract MNCs with more predictable policies. Some structural challenges need definite policy action by the government, especially in infrastructure and manufacturing. rownfield projects, stuck for approvals , need urgent de-bottlenecking . While there are some MNCs which have been disappointed , there are several Fortune 500 companies which view India as a strategic growth market. Let us also highlight the good, rather than bury all of it under the bad. While portfolio flows may flow West with tapering, the West still looks East when it comes to allocating FDI into strategic strong demographic markets like China, India and Indonesia.

Will India see lower allocations by FIIs in 2014?

It depends on the pace of India's reforms. India must focus on the controllable. In many ways, portfolio investors come in before rather than later into growth. But it's a function of whether India continues its path of restoring the confidence. De-bottlenecking infrastructure and FDI reform in insurance will send a strong signal. If India opens up its debt market to global investors more — whether through joining global bond indices or trading on Euroclear — it can only help, as experience of other markets shows.

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How to reform our political parties?  - Click to Download

How to reform our political parties

In 1985, a youthful Rajiv Gandhi tried to snatch the Congress away from the clutches of what he called "power brokers." He set up a committee, headed by veteran politician Uma Shankar Dikshit, to suggest ways of rebooting India's grand old party. The report was submitted sure enough, but was buried in the chaos that overtook the party after Rajiv's assassination in 1991. The Congress should dust it out now and implement some of its suggestions, which are easily possible to get done. For one, it should begin the process of identifying candidates for the coming Lok Sabha elections immediately and announce these candidates as soon as possible.

Election dates are likely to be announced by March 1, and all candidates should know if they are getting party tickets and where they will be contesting from. The Congress, and many other parties, delay these announcements fearing rebellion from disgruntled ticket seekers. They should remember that giving candidates enough time to build up a campaign is more important than internal dissension.

No political party in India is truly democratic, in the sense that leaders are elected from within. Regional parties operate on the whims of one supreme leader, the high command holds sway in the Congress and the BJP is run by the RSS. This is a shame in a country that fancies itself as the world's largest democracy.

Intra-party polls and primaries should be started by all parties. The Aam Aadmi Party, the big surprise in the Delhi elections, took the first steps towards this when it selected candidates through a system similar to primaries. It could do so because it has no historical baggage. Other parties, which have this baggage and foundational myths, can still settle on a system of primaries. Or risk getting captured by coteries.

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Guilty must be punished - Click to Download

Vageshwari Deswal, Senior Assistant Professor, Department Of Law, Delhi University

Perpetrators of horrific crimes cannot be allowed to take the defence of juvenility. Rape is an act of depraved mind.

The entire rationale of the Juvenile Justice Act, 2000, is to protect innocence. But rapes and murders are not committed by innocent people. More importantly, the state's responsibility towards children does not negate its responsibility towards society at large.

The alarming surge in the incidence of crimes committed by juveniles — National Crime Research Bureau data shows a majority of juveniles involved in crimes are 16 to 18 years of age — calls for urgent and considered action. Studies have shown that children are now attaining maturity earlier. Hence, blanket protection under the Act should not be extended to all juveniles below 18 years of age.

Like many other well-meaning laws, the Act is being misused, sometimes even by using children as agents for execution of crimes. In our country, manipulation of birth records is not difficult. So, criminals are taking the advantage of this legislation to evade punishment. Also, there is no uniformity in our laws on the age of majority. While for a girl, the age of consent under the Penal Code is 16 years, in cases of kidnapping, she is treated as a minor till 18. For boys, the corresponding age is 16 years, and for all children, the newly-enacted Protection of Children from Sexual Offences Act puts majority at 18 years. They are allowed to work at 14 years and vote at 18. For marriage, the age is 18 and 21 years, respectively, for girls and boys.

Juveniles involved in heinous crimes are different from children in need of care and protection. Under the law, the age of innocence is seven years and the age of discretion is 12 years. Beyond 12 years, a person is presumed to know the nature and consequences of his/her actions. The blanket cover of juvenility should not be extended beyond 16 years and punishment should be proportionate to the crime. Finally, laws must evolve to serve the interests of society. In determining punishment, the deciding factor must be the heinousness of the crime and the way in which it has been committed.

India needs cleaner air with cleaner resources - Click to Download

Chairman, Shell India Markets Pvt Ltd

India is set to become the world's third largest energy consumer by 2020, after China and the United States. With our burgeoning population and rapid industrialisation, domestic energy production cannot keep pace with growing energy demand. Crude imports have grown annually at close to 10% in the last decade and coal imports have grown at over 20% every year during the same time.

India's energy situation requires a three-pronged approach: to improve energy efficiency, accelerate development of domestic resources, and promote the use of cleaner energy sources. As our economy and population grow, the challenge will be to pursue economic imperatives alongside energy security; environmental stewardship and good health for future generations, all at the same time. A major contribution that the government can make is to become an enabler of cleaner, more reliable and affordable energy for the people.

The onset of winter smog in Delhi has once again brought the issue of air pollution to the forefront and rightly so. India has some of the most polluted cities in the world, ranking 126 out of 132 countries in a global environmental performance index survey conducted by Yale and Columbia universities.

Air pollution has become the fifth major cause of deaths in India. The World Health Organisation estimates an annual mortality number attributed to air pollution at a staggering 500,000. The economic impact of pollution and environmental degradation has cost the country $80 billion, equivalent to 3% of GDP, according to the World Bank.

As a country, we may be facing a shortage of domestic gas supply in the interim, but natural gas is an abundant resource. The International Energy Agency calculates that gas will last more than 230 years at current consumption rates. It is the cleanest fossil fuel as it has relatively low carbon dioxide emissions. Other emissions like sulphur oxide, nitrogen oxide, particulates, and heavy metals are also significantly less than other fuels.

India needs more exploration and domestic production to keep up with demand, and we welcome the recent initiatives proposed by the ministry of petroleum and natural gas in this regard. But it is important that this longer-term initiative is complemented by natural gas or liquefied natural gas.

What is needed to meet India's energy requirements is a balanced energy mix. Globally, it is well established there is no silver bullet to achieve this. But any plan to create a balanced energy mix that addresses environmental concerns for India should put natural gas at its centre. Gas is a clean fuel uniquely positioned to address the country's energy challenges and can play a central role on apathway to allow carbon, low pollution energy system with an increasing share of renewable energy.

Further delays in use of natural gas and other cleaner fuels will only increase the use of environmentally inefficient fuels, thereby exacerbating pollution. China and other southeast Asian countries are already dealing with problems associated with extreme levels of air pollution. We can choose to learn from the experiences in these countries by early adoption of the measures to address this problem.

India should nothave to make unnecessary trade-offs between growth and competitiveness, health and environmental sustainability and energy security. An energy system with greater efficiency, more natural gas and a growing share of renewable energy makes available a pathway without this trade-off to the benefit of our nation and the good of our people.

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Madhya Pradesh Chief Minister Shivraj Singh Chouhan on Monday announced that permission will not be granted to set up new liquor factory in the state henceforth.


"Some days back, we received requests seeking permissions to set up two distilleries. However, we threw away the applications as we has decided not to allow any new distillery in the state," Chouhan said on the sidelines of a programme in Indore.


He said that no new liquor shop will also be allowed in the state.

"The number of liquor shops will also be reduced gradually by conducting de-addiction programmes for the people," he said.

Chouhan further said that the government is also taking efforts to reduce the child mortality rate.

Chouhan expressed confidence that the ambitious Narmada-Kshipra Simhasth link project would be dedicated to the people by February 2014.

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India exports grew by 5.86 percent and imports dip by 16.3 percent in November 2013

Exports of India in November 2013 grew by 5.86 percent and reached 24.6 billion dollars against 23.25 billion dollars in November 2012. Apart from exports, the imports fell by 16.37 percent to 33.83 billion dollars. This dip in imports is the lowest level in since March 2011. This helps in narrowing the trade deficit.

The trade deficit in November 2013 under the review stood at 9.22 billion dollars as against 17.2 billion dollars in November 2012. Even the gold and silver imports dipped to 1.05 billion dollars in November 2013 as compared to 5.4 billion dollars in November 2012. During April-November period this fiscal, the imports aggregated at 25.5 billion dollars.

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Our education system is below global standards_says Pranab Mukherjee - Click to Download

ARUNACHAL PRADESH: President Pranab Mukherjee Saturday said there was an
urgent need to "salvage the declining standards of the country's higher education" if
India wanted to become a world power.

"If India is to become a world power, we must prove ourselves worthy of it by
creating a world class education system," Mukherjee said while speaking at the 12th
convocation of Rajiv Gandhi University here.

Pointing out that research plays a crucial role in extending the knowledge frontiers of
society, he said "new thinking and better coordination in the field of higher education"
was needed to solve society's problems.

"Research facilities must be upgraded to international standards to attract the brightest
minds. The research temper of the students must be developed and the spirit of
innovation ignited in the young minds," said Mukherjee while calling upon
universities to become "important platforms for curiosity and creativity."

Indian civilization had a long standing knowledge tradition and the country's ancient
universities -Takshashila, Nalanda, Vikramashila, Valabhi, Somapura and Odantapuri
-were renowned seats of learning that attracted scholars from outside, he said.
"Today, our universities lag behind the best universities in the world. According to an
international survey, an Indian university or an institution is missing from the top two
hundred ranks," he said.

"We cannot afford to continue with an education system which is below global
standards. Our leadership in fields such as science and technology is incumbent on the
level of competence of our scientists, academics, engineers and doctors," he added.
The president further asked the Rajiv Gandhi University to conduct research on
challenges to hill economy, conflict between traditional and modern institutions,
border trade opportunities and integration of the north-east economy with the national
and global economies.

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