India has come a long way from the days when a visiting managing director of the International Monetary Fund (IMF) would, on the one hand, be greeted with hostile demonstrations from unions and other opposition parties, and, on the other, go away after sermonising his hosts. The IMF&rsquo;s MD, Dominique Strauss-Kahn, neither faced angry crowds in New Delhi, during his visit last week, nor did he have to lecture his hosts on policy. On the contrary, he paid compliments to India&rsquo;s macroeconomic authorities and commended them for their policies and their record of economic management in difficult times. He went beyond the call of duty when he endorsed the government&rsquo;s views on capital inflows.

Strauss-Kahn and the Fund

Business Standard

The Indian public, used to the notion of the country being the undisputed leader in offshore services, has just learnt with some surprise that in the volume (voice or call centre) segment of the business process outsourcing (BPO) space, it has been outpaced by the Philippines. The Indian IT-BPO industry will not be similarly surprised as it has seen this coming for some time. In fact, it has contributed to the process. 24/7 Customer, the country&rsquo;s leading independent BPO firm, opened its facility in the Philippines in 2005, Wipro in 2007 and TCS a few days ago. The Philippines industry association says the country now has a 350,000 call centre jobs which will earn it $5.7 billion in export revenue, compared to India&rsquo;s 330,000 jobs and projected revenue of $5.5 billion.

Outpaced in offshoring

Having raised the matter of China&rsquo;s intention to build a dam across the Brahmaputra (known in China as Yarlong-Zangmu), New Delhi must insist on securing a proper response so that all those dependent on this mighty river are reassured of China&rsquo;s plans and intentions. That China has been planning to do this as part of its grandiose plan to divert the Brahmaputra waters to the Gobi desert to irrigate the arid northwestern region and to replenish water in the dying Yellow river, which remains dry for most part of the year, has been speculated for a long time. The multi-purpose irrigation-cum-hydropower project being built on the Brahmaputra (Zangmu) at Namcha Barwa on the eastern plateau of Tibet is believed to be part of this massive programme. At least five more dams are said to be either planned or under implementation on this river system at places like Guoduo, Dhongzhong, Ruxi, Linchang and Xiangda.

Dam on Brahmaputra

The visit of French President Nicholas Sarkozy, on the heels of a visit by the US president and on the eve of another by the Chinese premier and the Russian president, weeks before India&rsquo;s assumption of a non-permanent seat on the UN Security Council, draws attention to India&rsquo;s rising global profile. Business expectedly dominated the agenda during Mr Sarkozy&rsquo;s visit. Mr Sarkozy pulled out all the stops to promote French exports, particularly in high technology, which France urgently needs to boost its flagging economy. The mutual interest in energising the economic relationship makes robust sense. Bilateral trade in 2009 at &curren;5.37 billion ($7.1 billion) was 21 per cent lower than the corresponding figure for 2008, a consequence of the economic turmoil in Europe. While France is India&rsquo;s fifth-largest trading partner in Europe, India is even lower on France&rsquo;s radar, ranking 14th as a trading partner.

Vive la difference

The western press in general, and the British press in particular, has reacted with predictable sourness to Russia and Qatar winning the World Cup bids for 2018 and 2022, respectively. Much of the chagrin has to do with the fact that the winners are bit players in the global football scene and have upstaged the claims of more pedigreed footballing nations such as England, Spain and Portugal (jointly), Japan, Australia, South Korea and the US. The ire has been focused on tiny Qatar, the dark horse if there ever was one, since Russian teams participate in the major European leagues and the country has staged an Olympic event to bolster its sporting credentials. Dark hints of corruption and collusion are circulating. These may or may not be true &mdash; Fifa officials cannot be called saints by any means. But even if we account for such shenanigans, it would be hard to criticise the choice of Qatar in terms of Fifa&rsquo;s mandate to develop football globally.

Ball in Asia's court

India&rsquo;s polity may be in a crisis, but the economy is chugging along quite nicely. The Union finance ministry&rsquo;s mid-year analysis of the economy presents an upbeat view, forecasting a national income growth rate of more than 9 per cent this fiscal. The upward revision of Q1 GDP growth to 8.9 per cent implies that GDP growth rate for the half year is a healthy 8.9 per cent. This puts the economy well on course to meet the IMF projection of 8.8 per cent for fiscal 2011. Adding to the euphoria is the balance in the growth story for the year so far. Agricultural growth at over 4 per cent, admittedly aided by a base effect, has not merely helped in boosting overall growth and rural incomes, but is also expected to help mitigate runaway inflation. More to the point, bountiful rains, especially in the major food-growing regions, coupled with only a slightly lower net sowing area augur well for domestic food production during the rest of the year.

Sustaining a good story

China may not like it, and the incident may poison the atmosphere on the eve of Chinese Prime Minister Wen Jiabao&rsquo;s visit to New Delhi, but India has no other option than to do what it has always done, send a representative to attend the annual Nobel prize awards ceremonies in Oslo, including the one for peace. China&rsquo;s anger at a political dissident, Liu Xiaobo, a literary critic, writer, professor and human rights activist, who now languishes in jail for his views, getting the Nobel peace prize is understandable. The juries that have selected individuals and institutions for this award have not always covered themselves with glory, nor are they non-partisan juries. Many questionable awards have been doled out over the years. However, to point to the subjectivity of the Nobel peace prize, and the politics of the selection of awardees, as a reason for India staying away from the ceremony at this stage would be entirely inappropriate.

An Indian in Oslo

While investigations proceed, raids are conducted, Parliament&rsquo;s Public Accounts Committee examines issues and the government looks to the future, it is now clear that few have come out of the 2G spectrum controversy without being tainted in one way or another. Businessman and MP Rajeev Chandrashekhar and Ratan Tata have exchanged letters that suggest that there are no angels in this debate. Ironically, however, there are few real losers in this game, not even the public exchequer. Not only does everyone have an argument in defence of their individual roles, and there are various agencies of the government and Parliament that will examine these issues, but even the consumer and the exchequer can claim to have benefited. The telecom revolution in India, with unprecedented connectivity and the consequent economic benefits it has brought to rich and poor alike, to slick urbanites and remote farmers, remains one of the major gains of the past decade.

Redialling in telecom

How should one interpret the hike in deposit rates announced recently by SBI and a few other banks? Does it simply reflect the acuteness of the cash crunch in the money market with banks borrowing more than Rs 100,000 crore from RBI? Or was it, instead, a quick response to the counsel offered by the RBI governor to offer higher rates on deposits and charge lower rates for loans? Bank stocks have sold off since Monday with the stock market apparently under the impression that the

Hiking deposit rates

Businessman Azim Premji, chairman of Wipro Technologies and one of India&rsquo;s richest business leaders, made news a few days ago by transferring more than Rs 8,000 crore worth of his shares in Wipro Industries to a foundation named after him. This still leaves him with a large amount of personal wealth but also makes his foundation very wealthy.

Azim Premji's philanthropy

Was it poor strategy or smart tactics? India&rsquo;s eagerness to reveal its hand at the global climate conference in Cancun, Mexico, has angered critics at home, and the government must explain its flip-flops to carry conviction. The &ldquo;Cancun package&rdquo; is the outcome of an unhappy compromise, even though it reiterates the commitment of all to a reduction of greenhouse gas emissions. But it sets no binding targets or deadlines for doing so.

Cancun compromise

The arrests of several senior public sector bank officials for alleged graft do not appear to reveal any systemic flaws in the way the institutions in question operate. The relevant loans were disbursed by following due procedure and have not turned doubtful. But this itself reveals a deeper systemic flaw. Why do people have to be paid under the counter, if they in fact have been, to do what is right and in the right way? If public money is lost, then that is wrong. But if speed money has to be paid for public machinery to deliver what it is supposed to, then that is extremely disturbing. What is worse is the way the whole matter has been handled. There is a chance that it may end up making decision-makers in public sector financial institutions even more risk averse than they are now, thus creating further disincentives for large-ticket loans to be sanctioned.

Bankers' arrests and fallout

Even as the political stalemate in Parliament continued and the winter session ended without transacting much business, the Indian economy seemed to be chugging along. While every passing day has its share of worrying news on the political front for the government of the day, the news from the economy is good and offers some comfort to a beleaguered government.

Manufacturing growth

Union Food and Agriculture Minister Sharad Pawar&rsquo;s plea to hire land abroad to grow pulses to meet India&rsquo;s supply shortage seems well-intentioned, but a better and more enduring solution would be to boost domestic production. Pulses are a major source of protein for most people, especially the poor. While demand for pulses continues to rise, domestic supply is perennially falling short, with the demand for pulses rising in recent years. This has in great part contributed to food price inflation. The import of pulses is problematic. This is because, widely consumed pulses like pigeon pea (arhar or tur), black gram (urad) and green gram (mung) are not grown in too many places around the world. Moreover, even if Indian entrepreneurs respond to Mr Pawar&rsquo;s call and choose to go abroad and invest in pulses farming, they are likely to come up against the same hurdles that farmers in India face.

Problem with pulses

Prime Minister Manmohan Singh and Chinese Premier Wen Jiabao have established a personal rapport that is unique in the recent history of India-China relations. Never since the days when Jawaharlal Nehru and Chou en Lai could enjoy a smoke together has there been such informality at the highest level between the two Asian giants. It is this personal rapport that Mr Wen will seek to enhance when he arrives in New Delhi to win friends and influence people. From India&rsquo;s perspective, China is different not merely because of its rising global clout, but because of its added importance as India&rsquo;s largest trading partner and a country with which relations have been described as a mix of &ldquo;third world solidarity and strategic rivalry&rdquo;. This relationship, complex during the best of times, is currently under strain because of what India calls &ldquo;Chinese assertiveness&rdquo;.

Welcoming Wen

While the lay public may have been shocked by the revelation of an often cosy relationship between public relations (PR) professionals and the media, brought out by the Niira Radia telephone tapes, few in the media or in business would have been surprised. Few editors and reporters today can say they have not been approached for &ldquo;friendly stories&rdquo; or threatened with ad blackouts or block access for failure to publish Authorised Versions. The obverse &mdash; of reporters and editors demanding favours in return for friendly stories &mdash; has also grown so exponentially that it has now metamorphosed into formal corporate strategy for many media businesses. All of this does little to enhance the reputation of an industry that has grown insidiously for the past 15 years. But it is also true that the media has never appeared in so poor a light.

PRactical rules

This week&rsquo;s good news on food price inflation was evened out by the bad news on fuel prices hike. But, both were along expected lines.

RBI's policy dilemma

Last week&rsquo;s agreement between the Barack Obama administration and the Republican Party to postpone a proposed tax hike by two years, in return for Republican support for an extension of existing relief programmes such as employment benefits, cuts in payroll taxes and tax credits for parents and college students, will have implications not just for the US economy but also for other economies. It can have the effect of lowering US interest rates and usher in a cycle of investment-driven growth. JP Morgan has raised its forecast of fourth-quarter growth for next year from 3 to 3.5 per cent, while other forecasting groups are even more sanguine. This surge in growth is expected to dent the unemployment rate that is officially estimated to be close to 10 per cent. This is certainly a break in the clouds for a country desperately seeking some economic sunshine by way of a return to rapid growth and lower unemployment.

Mr Obama's compromise

In its quarterly monetary policy review this November, the Reserve Bank of India (RBI) indicated that it would &ldquo;pause&rdquo; on its rates action in the near term. Thus, its decision to stay on hold on all the three policy instruments &mdash; the repo rate, reverse repo rate and the CRR &mdash; in yesterday&rsquo;s mid-quarter review was largely expected by bankers and bond markets and so it did not come as a surprise. That, however, does not make the mid-quarter policy statement a non-event. The overwhelming concern of the day is the acute liquidity shortage in the market and RBI, instead of dismissing the problem as temporary or frictional, sought ways to address the problem.

Monetary policy dilemma

There has been an avoidable brouhaha over two Indian diplomats being subjected to frisking at airports in the United States. Umbrage has been taken to the fact that they aroused suspicion on account of their attire &mdash; one diplomat was in a sari and the other wore a turban. This is not new. Ask anyone with a Muslim name, or who is brown skinned, or bearded and not too old, what they have had to go through while travelling in the US since 9/11. All this is probably because of the racial and religious profiling ingrained in the minds of those concerned &mdash; the staff of the US Transport Security Administration. Indian security personnel are not free of such prejudices. Quite understandably, the agencies concerned are not apologetic, since they cite the rulebook. Ordinary Indians may wonder why so much fuss is being made over diplomats getting a taste of what they have been routinely subjected to, at home and abroad.

A pat-down of egos

When Time magazine started naming its &lsquo;Man of the Year&rsquo;, called &lsquo;Person of the Year&rsquo; in these gender-neutral times, it made it clear that the person chosen was one who had dominated the year&rsquo;s news &lsquo;for good or bad&rsquo;. In other words, unlike most of the year-end heroes normally honoured by the media in India, Time&rsquo;s Man/Person of the Year was not necessarily a force for good. Many villains have made it to the slot too. So, both the admirers and the critics of Mark Zuckerberg, the originator of the social networking internet site Facebook, can continue to stick to their view of the man, despite Time naming him &lsquo;Person of the Year 2010&rsquo;. Mr Zuckerberg&rsquo;s fans will cheer him as their hero, and his critics will continue to jeer him as the anti-hero, if not a villain.

Of heroes and anti-heroes

Incisive columns and editorial comment by top opinion leaders

Page 402 - Editorial Comment