Land Acquistion Bill

Land acquistion bill http://rural.nic.in/sites/downloads/policies/Final.pdf is next in line of the series of legislations and announcements made by the government with 2014 general elections in sight.

Land Acquistion Rehabilitation & Resettlement (LARR) Bill seeks to address the information as also power asymmetry that exists incase of land acquistions wherein power corporates and local landowners come face to face on a negotiating table and the issue of displacement of local population and provide appropriate compensation.

Features:

When : Land acquired by govt (for ultimate or immediate use) for ‘public purpose’ and land acquired by pvt corporates for PPP projects (In this case only the R&R provisions apply). Land acquired exceeds 50 acres in urban and 100 acres in rural areas.

How: Consent required of 80 % of the affected families to be sought before the government can acquire land for it. In the case of PPP, the entity has to secure consent of 70 % of affected families. And finally the pvt corporate should make payment of compensation and fulfil R&R requirements.

How much (Compensation): Compensation = 4x market value in rural areas and 2x market value in urban areas. When land is sold then 40% of the profits to be shared with the original land owners.

How much (Allowance): Subsistence allowance of rs 3000 / month per family for one month. Annuity of rs 2000 / month per family for a peiod of 20 years indexed to inflation.

Study: Social Impact Assessment (SIA) & Enviromenmental Impact Assessment (EIA) studies to be carried out.

Phew! Although in theory the need to address the information asymmetry is there, the bill seems to be going overboard wrt compensation to landowners. Even in cases where land purchase is privately negotiated. Compensation seems to be arbitary wrt to number of times market value. Clauses like conducting SIA seems unnecessary.

Swami Aiyar has this to say http://articles.economictimes.indiatimes.com/2013-08-25/news/41446092_1_land-acquisition-bill-resettlement-bill-luddites

Midnightbreakfast feels that adequately compensating the affected families is fair, however making land purchases prohibitively expensive and cumbersome is uncalled for especially when India is on the cusp on progress and development. As it is majority of farmers (~ 85%) in India have small holdings and wouldnt come under the ambit of this law and it is only the bigger ones that would be covered. Delays would be the norm incase of projects. Not desirable especially when the economic health of the country in doldrums.

USD/INR – Whats causing the fall?

So rupee is on everyones mind. As i post this USD/INR cross almost hit 69 to the dollar. Much has been written on the subject. Apparently its the worst performing currency since 2009 among the pack of the so called BRIC & Indonesia & RSA. Now there are a lot of factors affecting currencies which trade in one of the most liquid markets in the world. So this topic would see a series of articles.

Of the many factors. One can point out that high and persistent inflation as one of the principal causes for rupee’s woes.

A look at the Consumer Price Inflation (CPI) Index since 2009 it has averaged ~ 9%. Cumulatively inflation has risen ~ 40% since 2009. It follows that high inflation erodes the purchasing power of a currency relative to other currencies. This also makes domestic businesses uncompetitive in the international markets since the sustained rise in general price levels leads to input cost inflation resulting in lower competitiveness. This has to be adjusted which leads to depreciation in the currency value. What follows is high interest rates to fight this high inflation and attract foreign capital.

Now, what have the authorities done to tackle this? Well for starters RBI did hike rates albeit slightly late but the quantum of the hikes left a lot to be desired with RBI adopting ‘baby steps’ approach. Confusing signals in the form of what inflation index RBI is actually tracking whether it was WPI headline or WPI Core or CPI? Dilly dallying on this front rather than adpoting a assertive stance confused participants. Participants were ahead of the curve in most cases.

So, although India is better off in terms of Real GDP Growth rate than its peers, high and persistent inflation has caused havoc. Rupees fall can be attributed to it.

Disclaimer: Currency responds to lot many factors. This article looks at one of it. Would follow up on this article highlighting other factors.

Food for all (almost) ? or Free for all

Elections are just 9 months away now. Congress in its second election move has managed to get the National Food Security Bill (NFSB), its draft can be found here http://eac.gov.in/reports/rep_NFSB.pdf passed in Lok Sabha yesterday, the first being creation of telanga.

NFSB entitles Rs 5 kg of food grain per capita at Rs 5 / kg – rice, Rs 3 / kg of wheat and Re 1 / kg of millets. It covers ~ 67 % of population (75% of rural area and 50% of urban area), i.e 84 Cr people. Thus, ~ 420 Cr kg of food grained will have to procured and distributed.

Another grand scheme whose name would certainly have as a prefix MG/ IG / RJ. Executing it would be a nightmare of sorts. Here’s why;

– Since its a law, it creates entitlements and the government is legally obligated to make good the promise. Thus, no matter what the state of production in the country, the government has to procure foodgrains either locally or through imports.

– How would such large government procurements and purchasesd impact prices? Both would be inflationary, procurement locally would drive up prices as higher MSP’s would be required (incentive to produce since the poor farmer wont have any incentive.) Entering the international market would be expensive since prices would shoot up in anticipation of India entering the market.

– Since vast quantities of foodgrains are involved, it would require place to store them.

– Distribution has to be through PDS whose distribution capabilities are known to all with ~ 25 – 30% leakages.

– Are 84 Cr people in India poor? Certainly not. It is critical that the beneficiaries are accurately identified in the shortest time-frame possible. Our earlier post highlighted how despite government’s own planning commission stated how ~ 21% of population is poor i.e. 27 Cr people, the NFSB plans to cover 84 Cr people.

Midnightbreakfast feels that ultimately its jobs and progress that ultimately matters to people and not doles. Giving away doles is an old election strategy and theres nothing new in it per se. Falling growth , high and persistent inflation , corruption at the very highest levels of government has seriously eroded the credibility of this government. Voter anger cannot be assuaged by such doles.

Intern death at BoFAML

On August 15, 2013, a German intern at BoFAML International Investment banking unit in London died, apparently due to exhaustion after working through the night for 8 consecutive nights, returning home only to have a shower.

More of it here http://www.dailymail.co.uk/news/article-2401711/Moritz-Erhardt-Bank-America-Merrill-Lynch-intern-verge-45-000-year-job.html

Apparently an exchange student at U of Michigan, he was described as the ‘superstar of the internship programme’. Over ambitious and aggresive, he probably got carried away in his effort to impress his supervisor and company. Elementary orientation on the importance of ‘work life balance’ could have helped. May be thats too much to expect as interns are known to be bullied, pushed around by companies and generally treated like trash.

No different in this case, it reflects very poorly on the company where he was interning and especially the supervisor who didnt see this coming.

It very sad that a young life has been snuffed out just because he wanted to secure a job.

Namo vs Raga & Sen vs Bhagwati

Incase you have missed, the dust seems to be settling on the breathless media coverage on the riveting debate between 2 giants of the world of economics, Amartya Sen (Nobel Prize winner for economics) and Jagdish Bhagwati (economics professor at Columbia University and himself a nominee for the Nobel Prize several times). This debate is linked to the debate between Modi (Namo) vs R. Gandhi (Raga).

NaMo vs RaGa is centred around essentially two model of governances. The tremendous economic growth experienced by Gujarat led by manufacturing sector growth and ensuing prosperity (growth model) as against absymal growth achieved by the country as a whole in the last few years. Against this backdrop, grand social schemes (entitlements / dole model) have been announced by the Congress obstensibly to help the poor.

Its another matter that the governments own Planning Commission had recently announced that the proportion of poor to the total population had fallen drastically to ~ 21% but the National Food Security Bill (NFSB) envisages to include ~ 67% of the total population (75% of rural population and 50% of urban population) in its ambit. Plain arithmatic is more the quantum of doles, more the potential votes, whether the targeted recipient is actually deserves it is another matter.

So how do Sen & Bhagwati come in to the fray. This debate gained political overtones when Sen started peddling his economic model and openly supported the NFSB and debunked the economic model of the state of Gujarat and gave a big thumbs down to Modi and even went on to imply that minorities dont feel safe under his rule (as if he has done a survey !). Bhagwati on the other hand seems to prefer growth model over entitlement / dole model. He has given a thumbs up to the economic model of Gujarat and has mounted an attack on Sen and his entitlement model.

On the surface it may seem simply that Sen is only for entitlements and Bhagwati prefers only growth. However, a look deeper reveals both essentially stand for the same thing however their means differ with respect to the sequence. Sen is all for entitlements by the means of social welfare schemes to raise productivity which would consequently enhance growth whereas Bhagwati is all for growth first as it would raise enough resources (tax revenues) so as to implement social welfare schemes. 

Mint has this http://www.livemint.com/Politics/zvxkjvP9KNfarGagLd5wmK/Everything-you-wanted-to-know-about-SenBhagwati-debate.html 

To sum up, both the heavyweights, Sen and Bhagwati, essentially agree on the need for growth and redistribution. The difference is the extent to which redistribution and growth are important in their scheme of things.

Midnightbreakfast feels in the backdrop of India’s weak economic fundamentals, it just cant afford more schemes of a grandiose nature. Good governance and only sound economic policies would ignite investments which would spur growth and help in alleviation of poverty as it has over the past few years.  

Eastman Kodak to emerge from bankruptcy

Eastman Kodak, the popular film and camera company from the not t0o distant past, is all set to emerge from bankruptcy which it filed in early 2012 in the first week of September. http://abcnews.go.com/Business/kodak-emerge-bankruptcy-september/story?id=20028632 Heartening bit of news this.

Amateur photography which has never been more popular was virtually invented by this company. However, in its second birth the compnay would come back in an altogether different avatar and sell digital printing devices to other businesses rather than sell cameras.

Apparently, Kodak was driven to bankruptcy by a ~ $ 3 billion of pension obligations towards workers in the UK. Thus, inorder to make good this obligation, it will sell its traditional business to the pension fund of its workers.

From being one of the most recognised brands, the company is now associated with not having been able to deal with competition and technology obsolescence. Hope, coming out of bankruptcy will provide a sense of direction to the company.

EPL- First week

The first of EPL is now behind us and the results of all the fixtures were as expected. The only shock was Arsenal beaten by Aston Villa 1-3 at The Emirates Stadium.

Once again the competitive nature of the EPL was seen in the first week as 9/10 games produced a result and only one game ended in a draw. Also no game ended goalless.

Major wins came for the two Manchester clubs. Manchester United beat the tough Swansea team at Liberty Stadium 4-1 and Manchester City won 4-0 against the struggling Newcastle United at home.

Arsenal was once again the talking point after their 3-1 loss to Aston Villa at home. Manager Arsene Wenger was booed by the frustrated Arsenal fans as again they have failed to sign any big names till now in the transfer window. The loss only rubbed salt to their wounds.

Amongst the new faces in the EPL, Soldado who recently joined Tottenham from Athletico Madrid scored the only goal in their game against the newly promoted Crystal Palace at Selhurst Park. Although it looked a little harsh, end of the day it was 3 points for the Tottenham team who is aspiring for Champions League football next season. Barkley scored on his Everton debut to rescue his side for 2-2 draw against Norwich City at Carrow Road.

It was not a good start for the 3 newly promoted sides Crystal Palace, Hull City & Cardiff City. All the 3 teams lost their respective matches. Crystal Palace lost against Tottenham at home, Hull City lost away to Chelsea and Cardiff City lost away to West Ham United. But they showed character and fight and did not look out of place at the big stage.

It was a happy outing for most of the new high profile managers apart from Roberto Martinez of Everton who had to settle for a single point after the drawn match. David Moyes started his Manchester United era in the EPL post Sir Alex with a great win against Swansea. Self-proclaimed Jose Mourinho celebrated his return to the Stamford Bridge with an easy win against Hull City and Manuel Pellegrini started his Man City stint with a win against Newcastle.

Player of the week:

Undoubtedly the player of the week was Manchester United’s Robin Van Persie who scores a lovely brace against Swansea and proved why is the preferred striker over Wayne Rooney in the Manchester United side.

Danny Welback also impressed all with his 2 goals in the same match.

Upcoming Fixtures:

The most mouth-watering fixture in the coming week is between the title favourites Manchester United and Chelsea at Old Trafford. The fixture is not exciting only because of the quality of the two sides but also due to the rumoured transfer of Manchester United striker Wayne Rooney to Chelsea.

There are also some pending transfer rumours going on like the Rooney saga, Gareth Bale move to Real Madrid and the linking of various quality players like Lamela and Willian. Also there are strong links of players like Fellaini, Baines, Ozil to Manchester United.

Let us all wait and watch what the next week of EPL unfolds for us, both on and off the pitch.

England bury Aussie Ashes

The fourth test at Chester-Le-Street, Durham is now behind us and England have taken an inaccessible lead of 3-0 and in doing so they have won the series and regained the Ashes.

Although Aussies were the underdogs right from the beginning of the series, they are themselves to be blamed for being 3-0 down rather than being 2-1 up.

After being in a great position in first test they eventually lost the match by a narrow margin. The same bug caught them in the 4th test where chasing 299 in the last innings and .being 147/1 they inexplicably got bowled out for 224 and lost both the match and the series.

MidnightBreakfast had predicted in their first Ashes article that England were the favourites and Australian side would be a weaker side due to their inexperienced players.

This prediction has once again come true like many others before.

So keep reading many such interesting articles at midnight breakfast.

Have 60 lacs to spare? You could acquire citizenship of an exotic country

Tiny countries in the Carribbean islands like St. Kitts and Nevis as also Dominica offer what is known as ‘Cash for Citizenship’ or the more politically correct title ‘Citizenship for Investment program’ program.

CNN has this http://edition.cnn.com/2013/06/28/business/world-overlooked-countries-second-citizenship

Essentially there are two options;

1) Invest $ 250000 in the country’s Sugar Industry diversification foundation

2) Invest $ 400000 in one of the approved real estate properties

One of the above two could result in you getting citizenship in the island nation and visa-free access to nearly 130 countries and territories. Its 100% legal and is open to all except to Iranian nationals.

If dont have that much to spare there is another option. Head to another Caribbean paradise, Dominica.

1) Invest $ 100000 in the deposits of the country’s largest financial institution National Bank of Dominica.

The above could result in you getting citizenship in the island nation and visa-free access to nearly 85 countries and territories.

Other countries that have such ‘Citizenship for Investment program’;

1) Australia
2) Austria
3) Hong Kong
4) Singapore

However, the investment criteria is much higher and other criteria too are extremely stringent. People, who cant afford the ridiculously over valued real estate in Mumbai, could just head there to be amongst the beaches and swaying palms.

Politics over Soldier deaths

Shock has given way to numbness by now over the way the Indian Govt’s response to numerous terrorist attacks, border tresspasses and attacks on Indian consulates abroad.

Past week was witness to two of the above mentioned events; Pakistani army in collusion with about 20 terrorists attacked and killed 5 Indian soldiers. Also, few days ago, Terrorists struck near the Indian consulate in Jalalabad, Afghanistan. http://articles.timesofindia.indiatimes.com/2013-08-10/india/41265507_1_suicide-attack-suicide-vest-afghan-policeman Although,there were no casualties in the consulate as an alert police officer of the local police foiled the attack, there were unfortunately 9 deaths, most of them of children, when a suicide bomber blew himself apart.

Sample these responses from the Indian side after the Army came out with a strongly worded press release stating terrorists alongside Pak Army’s Border Action Team (same outfit which beheaded Indian soldiers back in January this year) soliders were behind the killings. India’s defence minister Mr. Antony actually refutes his own army by stating that it was the handiwork of ‘persons dressed in pak army uniform’, thus in stroke acquitting the Pak Army of any wrong doing. The Prime Minister didnt even bother offering even his by now token condolences. An idiot minister in the cabinet of Nitish Kumar actually goes on to say ‘soldiers and police officers are meant to die’.

Sample these reponses from the Pakistani side. PM Nawaz Sharif defends his army. According to Wikipedia, the Pakistani Foreign Office had summoned the Deputy Indian High Commissioner in Islamabad during which a protest note was handed on the “unprovoked Indian attack” and the Government of India “was strongly urged to take appropriate measures to avoid recurrence of such incidents in the future.” Pakistani Foreign Minister Hina Rabbani Khar said to the media that she was “unpleasantly surprised” by India’s accusations. She further said that “Pakistan’s government and its people have demonstrated a deep and abiding commitment to normalize and improve relations with India and to really start a journey of trust-building.”

MJ Akbar has this to say http://blogs.timesofindia.indiatimes.com/TheSiegeWithin/entry/after-pak-piracy-an-indian-conspiracy

Pakistan had stopped in officially engaging India after the debacle in 1971 and adopted the doctrine of ‘Death by thousant cuts’. It has been fairly successful in executing this plan. It strikes at will, knowing very well eventually nothing going to happen to them. It knows that weak leadership prevents India from doing anything. The numerous attacks till date are testimony to it. The Indian establishment hardly ever responds beyond the customary condolences. When public opinion / outcry gains momentum it is shouted down by the ‘doves’ who call it ‘war mongering’. Those idiots dont realise that a response doesnt have to be necessarily narrowed down to a binary: War or no war with Pakistan. This can be achieved by other means. Similar to what China pursues against India.

How many more deaths (army jawans as well as civilian) would it take for the government to stop politicising this issue. Clearly, the Indian government’s foreign policy failure alongside its economic policy failure is another feather in their the cap.