1. Cereal Consumption Includes Both Food and Feed and Should Rise, Not Fall as Average Income Rises : Many Economist believe that cereal consumption is inversely related with income. 'coz consumer diversify away from cereals to animal products. cereal consumption demand includes feed grains embodied in animal products . Therefore per head cereal consumption should increase with increasing income . US had per head cereal consumption of nearly 1 tonne in 2005
2. What Explains Falling Cereal Demand Per Head in India When Average Income Is Rising Fast? : decline is serious matter to worry. imply that cereal consumption is falling involuntarily for the poor.growth is so highly concentrated that is resulting in shift of income distribution of a particularly adverse type, namely, minority enrichment and mass demand deflation
3. Substantial Decline in Real Spending in Rural India: deflating nominal spending by consumer price indices to obtain “real spending” is no longer capturing the actual situation . all elements of the original basket may not even be available in the later year, Over long periods of time the fixed basket to which price indices are applied has led to misleading results.
Source : EPW Nov 20 ,2010
Saturday, January 22, 2011
Tibet and Pachsheel Agreement
Agreement on Trade and Intercourse between the Tibet region of China and India,' better known as the 'Panchsheel Agreement.'
Why Panchsheel Agreement was signed?
Hundred years ago (in July 1904) a young British colonel, Francis Younghusband, forced his way into the holy city of Lhasa. it was meeting of two different worlds for the first time.
Tibet was 'acknowledged' by London as a separate nation. China was extremely unhappy not to be a party to the accord.Ten years later (March 1914), wanting to show fairness, London called for a tripartite conference in Simla to settle the issue: The result was not fully satisfactory as the Chinese only initialized the main document and did not ratify it. The British and Tibetans however agreed on a common border demarcated on a map: the famous McMahon Line was born.
Treaty was in force when India became independent in August 1947
In October 1950, Mao's troops marched into Tibet. Lhasa appealed to the United Nations against China's invasion of Tibet. India was unable to stand up in favour of their peaceful neighbour against the might of Red China. In May 1951, some of the Dalai Lama's representatives signed -- 'under duress' -- a 17-Point Agreement with Communist China. For the first time in its 2,000-year history, Lhasa officially 'accepted' Tibet as a part of China
Panchsheel Agreement between India and China on April 29, 1954 marked the tail-end of events set in motion by the entry of Younghusband into Tibet.
It is composed of two parts: the Preamble (the Five Principles) and the content (regarding trade between India and Tibet and pilgrimage rights for Indians and Tibetans).
Five Principles of panchsheel agreement are :
1. Mutual respect for each other's territorial integrity and sovereignty
2. Mutual non-aggression against anyone.
3. Mutual non-interference in each other's internal affairs
4. Equality and mutual benefit
5. Peaceful co-existence
Drawback to India
-Chinese intrusions into Indian territory began hardly 3 months after the signature of the accord.
-Agreement opened the door to China's military control of the Roof of the World by the People's Liberation Army. This translated into building a network of roads and airstrips heading towards the Indian frontiers in NEFA and Ladakh.
-Damming and diversion of the Brahmaputra. because the people of Tibet have no say in what is happening in their country.
-India accepted Tibet as part of China. Though neither the Preamble (the Five Principles) nor the provisions of the agreement are in force today, the acceptance of Tibet as a part of the People's Republic of China remains a fact.
-China Captured sinkiang in ladakh.Tibet-Sinkiang highway' is cutting through Indian territory. Beijing in return recognited Arunachal Pradesh as being a part of India has been mentioned as a possible compensation. But this does not make any sense as the Chinese claim on Arunachal is legally and historically empty of any substance.
Wednesday, January 19, 2011
Indus Water treaty
After partition of India 80% irrigated area went to pak but headwater that serves these canals are in kashmir (India). World bank offered help to resolve dispute of water sharing between India and Pakistan. After 10 yrs of negotiation JL Nehru , Ayub Khan and World bank signed IWT
There are four elements of treaty
1. According to treaty 3 western rivers - Jhelum indus and chenab water to pak and
water from beas sutlej and ravi to india.
2. 20 % financing will be done by India for development of Tarbela dam on indus
mangla on jhelum and link canel in Pak.
3. Use of Pak's river for hydroelectric power generation may be done by India before they
reach Pakistan. dams could alter timing of water posing environmental risk thus restriction on
storage capacity on dams in India.
4. Dispute resolution machanism was set up between - India and Pak where IWT commissions
would resolve any dispute or by nutral party arbitrator as appointed by World bank or International court of arbitration.
There are four elements of treaty
1. According to treaty 3 western rivers - Jhelum indus and chenab water to pak and
water from beas sutlej and ravi to india.
2. 20 % financing will be done by India for development of Tarbela dam on indus
mangla on jhelum and link canel in Pak.
3. Use of Pak's river for hydroelectric power generation may be done by India before they
reach Pakistan. dams could alter timing of water posing environmental risk thus restriction on
storage capacity on dams in India.
4. Dispute resolution machanism was set up between - India and Pak where IWT commissions
would resolve any dispute or by nutral party arbitrator as appointed by World bank or International court of arbitration.
Nutrient-Based Fertiliser Subsidy
The government has decided to fix the subsidy on nutrients i.e.- Nitrogen (N), Phosphorus (P) Potash (K) and Sulphur (S) contents.
In addition to the fixed subsidy on above mentioned nutrients, there will be an additional per tonne subsidy for subsidised fertiliser carrying other secondary nutrients and micro nutrients in formulations approved under FCO 1985.
Fertilizer subsidy is second largest subsidy after food and has become sensitive political issue. Proper pricing and application of fertilizers could reduce subsidy bill. Moreover with complex grade of fertilizers there was a need for simplified pricing formula. India also has obligation under AOA to reduce it's agriculture subsidy. Nutrient - Based subsidy will provide incentive to farmers to test their soil and recommendation of crop and doses of nutrient. Fertilizer uses can be considerably reduced by applying recommended doses of fertilizer.
There are growing evidences to show that underground water quality in rural area is deteriorating due to excessive use of nitrogen based fertilizers. There is little private cost with unbalanced application of nutrients but large environmental and negative externalities are associated. Bio- fertilizers is another option, but willingness to adopt bio- fertilizers is more among those who have better access to agricultural information , high income and animal husbandry.
Bimal Jalan Report
Bimal Jalan Committee was setup by SEBI to 'Review Ownership and Governance of MII (Market Infrastructure Institutions) .
Background
Formation of NSE ended investor-unfriendly pratices of existing exhanges and povided tehnologial innovations and reform in industy. NSE was able to capture market in equity , daivative tradings. But with rise of MCX , the monopoly of NSE in derivative trading is threaten by MCX. Now MCX wants to enter equity domain by MCX-SX. SEBI turned down the application on grounds of ownership structure. MCX-SX has taken SEBI to court . SEBI has constituted the Bimal Jalan Committe to "review the ownership and and Governance of MII"
What is MII ?
MII create, facilitate capital market in its operation by providing infrastructure for trading , clearance. It includes depositories, exchanges and clearing corporation.
The number of stock exchange in India has shrunk. Currently there are only two main exchanges BSE and NSE. Since exchanges are profitable business it is expected that many new exchanges will come up in near future. New rules and regulations are requires for ownership and effective governance of exchange.
Suggestions by Bimal Jalan Committee.
1. Non- Listing of MII on stock exchange.
The propose is to avoid foul playing in price of MII stock. Since MII owns exchange there is possibility of foul play with price of MII stock. Non - Listing will led to non- availability of price for trading of MII stock and fewer exit options for investor. This can discourage investors from investing in MII.
2. MII will not be allowed to make unreasonable profit.
Report states that since MII are facilitating market and is public utility it should earn reasonable profit. Profits of MII are capped. Investing in MII and raising resources for MII will become difficult with profit cap. and non- listing.
3. Only banks and public finance institutions can be anchor institution.
To make it more lucrative for banks and PFI, committee has increased the maximum holding limit from 15% to 24%. Anchor institution will take lead in setting up of MII . Since Banks and PFI 's core line of business is not MII hence they always remain passive investors.
4. Minimiun capital required for exchange is rs 100 Crore.
Rs 100 Cr is very less. To setup an exchange of NSE and BSE level an investment of more than Rs 1000 Crore is required.
5. Clearing house should have net worth of Rs 300 cr.
Banks and Insurance companies have higher risk involved as compared to clearing house still the networth requirement for Banks and Insurance is Rs 300 Cr. and Rs 100 Cr. Setting high net-worth requirement may discourage investors.
6. Capping vaiable pay to Executives.
This would reduce pay performance link in executive compensation. As a result one can hardly expect executives to be ever-ready to adopt the latest global best practices and technological innovations to maintain service standards.
Biggest criticisms of the Jalan Committee recommendations is that it would perpetuate NSE’s monopoly and restrict competition in the sector which, in turn, will slow down innovations in an extremely dynamic in-dustry and possibly reduce service quality.
Background
Formation of NSE ended investor-unfriendly pratices of existing exhanges and povided tehnologial innovations and reform in industy. NSE was able to capture market in equity , daivative tradings. But with rise of MCX , the monopoly of NSE in derivative trading is threaten by MCX. Now MCX wants to enter equity domain by MCX-SX. SEBI turned down the application on grounds of ownership structure. MCX-SX has taken SEBI to court . SEBI has constituted the Bimal Jalan Committe to "review the ownership and and Governance of MII"
What is MII ?
MII create, facilitate capital market in its operation by providing infrastructure for trading , clearance. It includes depositories, exchanges and clearing corporation.
The number of stock exchange in India has shrunk. Currently there are only two main exchanges BSE and NSE. Since exchanges are profitable business it is expected that many new exchanges will come up in near future. New rules and regulations are requires for ownership and effective governance of exchange.
Suggestions by Bimal Jalan Committee.
1. Non- Listing of MII on stock exchange.
The propose is to avoid foul playing in price of MII stock. Since MII owns exchange there is possibility of foul play with price of MII stock. Non - Listing will led to non- availability of price for trading of MII stock and fewer exit options for investor. This can discourage investors from investing in MII.
2. MII will not be allowed to make unreasonable profit.
Report states that since MII are facilitating market and is public utility it should earn reasonable profit. Profits of MII are capped. Investing in MII and raising resources for MII will become difficult with profit cap. and non- listing.
3. Only banks and public finance institutions can be anchor institution.
To make it more lucrative for banks and PFI, committee has increased the maximum holding limit from 15% to 24%. Anchor institution will take lead in setting up of MII . Since Banks and PFI 's core line of business is not MII hence they always remain passive investors.
4. Minimiun capital required for exchange is rs 100 Crore.
Rs 100 Cr is very less. To setup an exchange of NSE and BSE level an investment of more than Rs 1000 Crore is required.
5. Clearing house should have net worth of Rs 300 cr.
Banks and Insurance companies have higher risk involved as compared to clearing house still the networth requirement for Banks and Insurance is Rs 300 Cr. and Rs 100 Cr. Setting high net-worth requirement may discourage investors.
6. Capping vaiable pay to Executives.
This would reduce pay performance link in executive compensation. As a result one can hardly expect executives to be ever-ready to adopt the latest global best practices and technological innovations to maintain service standards.
Biggest criticisms of the Jalan Committee recommendations is that it would perpetuate NSE’s monopoly and restrict competition in the sector which, in turn, will slow down innovations in an extremely dynamic in-dustry and possibly reduce service quality.
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