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Further to the International Olympic Committees suspension imposed on the Indian Olympic Association,the International Boxing Association (AIBA) Executive Committee Bureau has decided today December 6to provisionally suspend the Indian Amateur Boxing Federation (IABF), the AIBA said in a statement.

This provisional suspension is also due to the fact that AIBA had learned about possible manipulation ofthe recent IABFs election.

AIBA will now investigate this election and especially a potential political link between IOA President, asformer Chairman of the IABF, and the IABF election, it added.

During the September elections, outgoing President Abhay Singh Chautala, who was elected IOAPresident despite IOCs suspension, was retained in the body as nominated Chairman of the body.

The development now also puts a question mark over Mr Chautalas election as IOA President since hecame into the fray as an IABF representative. Interestingly, his brother-in-law and BJP MLA fromRajasthan, Abhishek Matoria was elected as the new IABF President.

Stunned by the suspension, Mr Matoria said that the world body had been apprised of the election processin detail.

AIBA had specific queries about the election process and we had explained to them that there was nomanipulation. Those who got elected were unanimous choices and just because there was unanimity, theAIBA cannot allege manipulation, Mr Matoria told PTI.

This is a provisional suspension and I am sure it would be lifted soon after we explain our stand to AIBA. Ifneed be, I will personally go and speak to AIBA officials in Lausanne, Mr Matoria said.

Our boxers are not threatened by any repercussions for the time being because the next major AIBA eventis quite far and the matter will be resolved by then, he added.

The next AIBA event is the Junior World Championships in August next year, followed by the senior WorldChampionships in October.

A senior IABF functionary told PTI that there might be a re-election.

Lets wait and see. Maybe there would have to be a re -election in a proper manner with AIBA Observerbeing present, he said.

In the September IABF elections, the body had been left in a fix after the Sports Ministry barred it frommaking constitutional changes that could have facilitated continuation of the incumbent set ofoffice-bearers.

Meanwhile, the AIBAs decision came as a bolt from the blue for the boxers, many of whom are in thenational camp in Patiala.

It is a sad day for Indian boxing and I cant understand how such a development can take place. I dont

understand why the matter was not explained to AIBA, Indias first Olympic medallist in the sport, VijenderSingh, said.

The Beijing Olympics bronze-medallist was, however, hopeful that the issue would be resolved soon.

The next AIBA event is quite far but hopefully we would not sit on it for too long and get the suspensionrevoked as soon as possible, he said.

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Funding for science and technology likely to go upThe Union government has proposed to increase the funding for science and technology from 0.9 per centof the countrys Gross Domestic Product (GDP) to 2 per cent of the GDP in the 12 five year plan if theprivate and public industries contribute half of the fund, said K. Kasturirangan, Member (Science) ofPlanning Commission of India.

Speaking at the inauguration of the fifth edition of Bangalore Nano here on Thursday, Mr. Kasturirangan,who is also the former chairman of the Indian Space Research Organisation, said that the Uniongovernment was in talks with public and private industries to contribute funds equivalent to one per cent ofthe GDP.

The government is willing to sanction up to one per cent provided there is a matching contribution from theprivate and public sectors and this can be in terms of research inputs. Chairman of the Science AdvisoryCouncil to the Prime Minister C.N.R. Rao is playing a key role in bringing both the public and privateindustry into an arrangement with the government for this, he said.

He said that special importance was being given for the growth of Nano Technology in the 12 Five YearPlan by granting funds to aid research and education.

India contributes 3 per cent of scientific output in global research. Our countrys position in global science

research has risen to 16th from ninth. We are aiming to reach the sixth position, he said.

Prof. Rao, who is also the chairman of Karnatakas Vision Group on Science and Technology andNanotechnology, said that India needed people who have a passion to do things.

What India requires is a bunch of nuts, crazy fellows who are really crazy about doing something... who arereally mad. There is a shortage of mad people (people with passion) here. There are too many normalpeople in Bangalore, he said.

Speaking about the developments in the area of Nano Science and Technology, Prof. Rao referred toNano Nose, a diagnostic tool developed in Israel to detect breast cancer.

Pointing out that people with breast cancer breathe out unique molecules that can be detected by Nano

Nose, Prof. Rao said that this tool was in the final stages of trial in Israel.

Referring to research in nanotechnology in the U.S., Prof. Rao said that scientists there were working ontargeting specific cancer cells using nano particles to burn the cells.

Earlier, Bangalore Nano National award was presented to G.U. Kulkarni, Professor, Chemistry and Physicsof Materials Unit and DST Unit on Nanoscience, Jawaharlal Nehru Centre for Advanced ScientificResearch, for his contribution in the field of nanotechnology.

I.S.N. Prasad, Principal Secretary, Department of IT, BT and Science and Technology, Sir Richard Friend,Cavendish Professor of Physics, Cavendish Laboratory, Cambridge, U.K., and A.K. Sood from theDepartmentof Physics, Indian Instituteof Science, Bangalore, spoke.

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Whos afraid of moral defeat?

SHARE COMMENT (16) PRINT T+Irrespective of how the Rajya Sabha votes on the resolution against Foreign Direct Investment inmulti-brand retail, the United Progressive Alliance government has won where it matters most: in the LokSabha. Given that some of the constituents and supporting parties of the UPA were against FDI inmulti-brand retail, the government did well to tide over this mini-crisis, defeating the Opposition-sponsoredresolution comfortably enough in the end. A loss in the Lok Sabha would have raised questions about the

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legitimacy of the government, and of the continuance of the pro-reforms push. However, the walkout by theSamajwadi Party and the Bahujan Samaj Party, both opposed to FDI in multi-brand retail but supportive ofthe government, ensured the defeat of the resolution moved by the principal opposition, the BharatiyaJanata Party. The fact that the numbers in support of the UPA did not add up to 272 or more, which is theabsolute majority in the House, is the only consolation for the BJP, the Left parties and the TrinamoolCongress, who were in the forefront of the battle against the government on this issue. But the Congresswill have no problem in dealing with this moral defeat that means nothing at all in real terms.

The way the vote went is a pointer to emergence of key political fault-lines in the run up to the 2014 generalelection. Both the SP and the BSP were content to register their opposition on FDI and walk out withoutactually voting against the government. Obviously, in their calculations, the survival of Prime MinisterManmohan Singh is much more important than the debate over multinational giants, kirana stores andfarmers. After all, the government had left it to the States to decide whether or not to allow FDI. Despite thebest efforts of the BJP, the resolution was seen by the two Uttar Pradesh-based parties in the context of thesurvival of a secular government at the Centre. The BJP was hoping to keep the focus on FDI, and awayfrom the communal-secular divide, but for the SP and the BSP, as for the UPA, too much hinged on the FDIvote. Clearly the BJP is finding its communally divisive agenda difficult to live down. No matter what itprofesses in the immediate context, all its actions are viewed by other secular parties in the larger context ofits communal politics. Fear of the BJPs sectarian politics is enough to drive parties such as the SP and theBSP into the arms of the Congress. To the credit of Congress political managers, the FDI vote turned not

just on the economy, but on the countrys social-democratic fabric too. While the BJPs past wrongdoingsare still helping the Congress, the Congresss present wrongdoings are not coming to the aid of the BJP.

====================================================

Paper glitters more

SHARE COMMENT (2) PRINT T+The surge in the domestic demand for gold has continued unabated even when gold prices are goingthrough the roof and new records are becoming the order of the day. With very little of it mined within thecountry, India has been a massive importer of the precious metal.The surge in the domestic demand for gold has continued unabated even when gold prices are goingthrough the roof and new records are becoming the order of the day. With very little of it mined within the

country, India has been a massive importer of the precious metal. Last year (2011-12), imports aggregated1067 tonnes at a value of $60 billion, sharply higher than the $40 billion spent on gold imports the previousyear. The bulk of the demand within the country comes from households, both for jewellery making and increasingly for investment. In fact, the demand for gold bars and coins has grown tremendously inrecent years while the tradition of ornament making has continued to spur gold demand. Of the severalreasons attributed to the high demand, a few are prosaic: gold, in a standardised form as bar or coin, isavailable more freely than ever before, sold even through bank branches. However, it is the realisation thatgold as an investment product can consistently beat almost all other normal avenues such as bank depositsand shares both in terms of appreciation and as a hedge against inflation that is behind thephenomenal spurt in demand. The macroeconomic implications of this development are huge and althoughquite apparent to policymakers for a while, are only now beginning to engage their serious attention.

An obvious consequence of the inelastic nature of imports of gold and, of course, energy products has

been the burgeoning import bill and consequent widening of the trade imbalance. It is a big challenge toreduce the current account deficit, which was at a record 4.2 per cent of the GDP in March, to moreacceptable levels. Moderating gold imports through fiscal or administrative measures is not a viable optionfor an economy that is integrating fast with the rest of the world. Past experience suggests that illicitchannels and hawala trading will emerge in the event of a clampdown. Another deleterious consequence ofthe preference for physical gold has been the sharp reduction in household financial savings, which arevitally needed for the industrial economy. An interesting idea recently suggested by RBI Deputy GovernorSubir Gokarn of popularising paper gold financial savings instruments which are backed by gold isworth pursuing immediately. Long available in centres like Singapore, these products in effect call uponbanks to buy and sell gold at market determined prices so that their customers can enjoy all the benefits of

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gold investment without the hassles of storing it physically. The craze for physical gold will hopefully comedown then.

====================================================Remembering to forget

MEENA MENONIn Night and Fog (1955), Alain Resnais powerful testament to Nazi brutality, the camera pans over thechilling remnants of concentration camps rows of curved concrete pillars with barbed wire, empty gaschambers and hospitals, and the barbaric shower rooms where Jews were gassed to death. There is nosuch detritus of the violence in Mumbai in 1992-93. While there is a clamour for a statue to the late ShivSena leader Bal Thackeray, indicted by the Srikrishna Commission for his role in the riots after the BabriMasjid demolition on December 6, 1992, there are no memorials to the over 900 people who were killed andmany more who went missing. While justice for survivors has been delayed and denied, some are stillfighting for close to 20 years with a system that is unyielding. The riots divided the city, hardeningstereotypes, creating more ghettos and putting a question mark forever on Mumbais cosmopolitan veneer.

Nearly 20 years after her son was killed, Akhtari Tahir Hasan Wagle gave an account of his death to asenior police officer, the third to investigate the case of her son. She told him the same things that she hadrepeated a hundred times to journalists and others who cared to listen. My husband was not at home that

day. It was January 10, 1993, around 11 a.m. We heard the police entering the narrow lane to the chawl andclosed all our doors and windows. They were going into houses and dragging all the men out but theykicked the doors open and I saw my son Shahnawaz being taken away.

A PEONS PLIGHT

The police ignored her pleas that Shahnawaz, 16, was a student and took him down two floors. Mydaughter Yasmin was standing at the window when she suddenly shouted and said Shanu is dead, theyveshot him. We both ran down and asked the police what had happened. I asked for my son. Give him backto me, I said. Instead they put him in a van and threatened to beat us if we didnt stay back, laments MsWagle.

That justice for riot survivors has been too little, and often non-existent is exemplified in the case of Farooq

Mapkar, whose case against the police officers who fired inside Hari Masjid is still dragging on with theCentral Bureau of Investigation (CBI) submitting a closure report in December 2011. The next date for thehearing is December 20. Dont ask me how much time and money I have spent for the last 20 years on mycase, says Mapkar, 45, a peon in a cooperative bank. He fought long and hard with a reluctant Stategovernment which even went to the Supreme Court to scotch a CBI investigation in the Hari Masjid firingcase where police randomly fired inside the prayer hall on January 10, 1993 killing six in all. Mapkar, whowas shot in the back, was in jail for 15 days before getting bail and having the bullet removed. After theBombay High Court ordered a CBI inquiry in 2008, a First Information Report was registered against thensub-inspector Nikhil Kapse and others who were alleged to have fired in Hari Masjid.

CHASING COMPENSATION

While the State set up a designated court under the Terrorist and Disruptive Activities (Prevention) Act

(TADA) court to try the cases of the serial blasts of March 12, 1993 which resulted in 100 convictions in2007 the riot victims had nowhere to seek justice. Instead the police closed 1,371 of the 2,267 cases. Ofthe 1,371, 112 cases were reinvestigated. In eight cases, fresh charge sheets were filed, according to theMaharashtra governments affidavit to the Supreme Court in January 2008. Of the 31 policemen indicted bythe Srikrishna Commission, 10 were punished after departmental inquiries, 11 were found not guilty andone died. Cases on the implementation of the commissions report are still pending in the Supreme Court.

Victims have had to face the trauma of chasing compensation for missing persons or for a paltry Rs.5,000for their destroyed homes or workplaces. Women like Hazra Bi cannot hope to get justice for the brutalmurder of her husband and son and Mukim Sheikh, whose father was killed in the riots, did not even bother

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to testify before the Srikrishna Commission. Mumbais fabric of togetherness was ripped apart like neverbefore in the post-Babri Masjid demolition violence. New ghettoes sprung up inside and even outside thecity, like Mumbra and parts of Mira Road in Thane which ironically were dubbed terror hotbeds by thepolice.

Only one Shiv Sena politician, the late Madhukar Sarpotdar, was convicted for hate speech in July 2008and handed out a years simple imprisonment. Of the eight cases filed in 1993 against Bal Thackeray for hisarticles in Saamna, four were withdrawn from the Dadar court. Of the remaining in two cases, charge sheetswere filed after the stipulated time period and two were closed for lack of evidence, according to informationusing the Right to Information (RTI) Act. Of the nearly 20 cases in all against Thackeray for hate speech andother sections of the Indian Penal Code, most are closed or the government has not given permission forhis arrest.

Mumbai chugs along. No one will notice Rashida Kotawala as she sits at her street side stall repairing bagsin Vile Parle. Or Sudarshan Bane who ekes out a living as a driver and does odd jobs. Banes parents wereburnt to death in Gandhi Chawl in Jogeshwari, and his sister Naina escaped with severe burns. The Gandhichawl incident was used by the Shiv Sena to wreak revenge forHindu deaths, sparking off the bloodysecond phase of the Mumbai riots in January 1993. The Bane family, the face of the riots then, isstruggling to survive now. While Mumbai mourns Bal Thackeray, there is a veil over the violence he wasaccused of perpetrating after the Babri Masjid demolition.

meena.menon@thehindu.co.in

=========================================================

Prior approval must for CICs to invest in overseas JVs: RBI

PTISHARE COMMENT PRINT T+The Reserve Bank of India (RBI) on Thursday said core investment companies (CICs) would require priorapproval from the RBI for investing in joint ventures/subsidiaries or offices overseas in the financial sector.

All CICs investing in joint ventures or subsidiariesor representative offices overseas in the financial sector

will require prior approval from the bank, the RBI said in a release. CICs are those companies that investprimarily in group companies in different sectors of the economy.It has, therefore, been decided to issue aseparate set of directions to CICs with regard to their overseas investments, the RBI said.

The CICs, now exempted from registration and desirous to make overseas investments in financial sectors,would require a certificate of registration from the RBI and would have to comply with all the regulationspertaining to this, the apex bank said. However, exempted CICs do not require to be registered with the RBIfor making investments in non-financial sector, it added.

========================================================

Decision on NIB deferred

PTISHARE COMMENT PRINT T+The Union Cabinet, on Thursday, deferred its decision on setting up the National Investment Board (NIB) asPrime Minister Manmohan Singh wanted more inter-ministerial discussions on the proposal.

The proposal to set up a high-level body for according speedy clearance to infrastructure projects entailinginvestment in excess of Rs. 1,000 crore was initially mooted by Finance Minister P Chidamabram.

The Prime Minister wanted more discussion to he held on the issue, said a Cabinet Minister who attendedthe meeting.

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The proposal, according to official sources, may come up for Cabinet approval next week.

================================================

Defence lab develops depth detector for rescue ops

In June 2010, a water tanker bound for a factory at Ambalapara, near Palachuvadu, hurtled off a narrowroad into an abandoned, water-logged quarry. There was no mechanism to fathom the depth of the watercolumn, filled with hyacinths and thick undergrowth, which delayed rescue efforts considerably.

In the crowd that gathered on the rims of the quarry to watch the rescue operation on the second day, weretwo young scientists of the Naval Physical and Oceanographic Laboratory (NPOL), a Defence Researchand Development Organization (DRDO) Lab, located at nearby Thrikkakara. Their director, S. AnanathaNarayanan, had suggested that they go to the site to see what was going on.

One of the scientists, Sameer Abdul Azeez, also the convener of the defence labs creativity and innovationcell, came back wondering if he could tweak some defence technology to develop a spin -off product thatwould aid rescue operations in water bodies.

Two years later, the lab has been able to cut out one. Tarangini, as the device is named, is an underwaterdepth and bottom hardness indicator that gives the user a fair idea of the depth and nature of bottomsurface of a water body.

Mr. Azeez was working on an airborne (dunking) sonar system project when the Palachuvadu accident tookplace. Along with colleague Eldho Jacob, he moulded the technology in a scaled down manner, tappingresources from the labs technology incubation cell to fashion the instrument.

Tarangini has its industrial prototype developed, tested and calibrated at various water bodies. Amarket-ready version is under development with Kaynes technology, Mysore. The National Institute ofDesign, Ahmedabad, was roped in to do the product styling. The lab intends to launch it through theAccelerated Technology Acquisition and Commercialisation programme, a joint initiative of the DRDO andFICCI.

For Anantha Narayanan, like the Sanjeevani acoustic life detector earlier developed by the laboratory,Tarangini is a key instrument, which will be of use to rescuers as well as paramilitary forces operating ininsurgency-hit jungles. The device will come in handy when they are to cross unfamiliar water bodies, hesaid.

Small wonder, after a presentation on the instrument was made at the National Police Academy inHyderabad recently, enquiries are pouring in from police about its availability. As the co-architect of thedevice, Mr. Azeez points to its ease of use, as it can be recharged with a mobile charger. It has ambientand inherent lightning, suitable for round-the-clock use, and a depth ceiling of 100 ft (30 metre) beyondwhich men cannot go without diving gears, he says.

The market version of Tarangini is expected to be launch-ready in a months time.

=========================================

BSE selects 14 investment banks for IPO

PTISHARE COMMENT PRINT T+Premier stock exchange BSE Ltd., on Thursday, moved closer to its initial public offering (IPO) plan byselecting 14 investment banks, including Bank of America-Merrill Lynch, JP Morgan, Barclays and UBS, fora public issue that is slated to hit the markets in the first half of next year, a top official said.

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Yes, we have selected 14 investment bankers for our forthcoming IPO slated for the first half of 2013, BSEChief Executive and Managing Director Ashish Kumar Chauhan told PTI.

The other lead managers to the issue include domestic majors Kotak Mahindra Capital, ICICI Securities,Edelweiss Capital, Axis Capital, and IIFL, Mr. Chauhan added.

BSE, which had reported a net profit of Rs.178 crore on a revenue of Rs.578 crore last fiscal, will be thesecond bourse to get listed after Multi Commodity Exchange of India (MCX) made its debut in March.

He did not divulge the details of the issue, saying the investment bankers would decide on the pricing andthe issue size.

BSE was seeking an offering that would value it at about Rs.4,000-5,000 crore, sources close to thedevelopment said.

BSE has opted for the public issue to give an exit route to existing shareholders, who hold over 41 per centstake in the exchange.

The IPO could fetch Rs.800-1,000 crore, they added.

At Rs.5,000 crore, the BSEs valuation would be at a 37 per cent discount to MCXs current marketcapitalisation of Rs.7,881 crore.

Late last month, in an interview to PTI, Mr. Chauhan had said that the oldest Asian bourse had appointed acommittee to finalise the bankers.

BSE had in October once again retained the No. 1 slot as the worlds largest exchange in terms of numberof companies listed.

Markets regulator SEBI notified new rules for ownership and governance of bourse this June, which alsoincluded a clause on listing of bourses.

======================================================

Banks advised to increase the pace of NPA recovery

Worried over the slowdown of the economy and the rising non-performing assets (NPAs) of public sectorbanks, the Reserve Bank of India (RBI) has asked banks to put a loan recovery policy in place while thegovernment has asked them to take new initiatives to increase the pace of recovery and management ofNPAs.

The cause for concern is the fact that the NPAs of public sector banks rose close to one percentage pointfrom 3.17 per cent to 4.01 per cent in six months to September 2012, according to official records of theFinance Ministry.

On its part, the RBI has asked banks to have a loan recovery policy, which sets down the manner ofrecovery of dues, targeted level of reduction (period-wise), norms for permitted sacrifice/waiver, factors tobe taken into account before considering waivers, decision levels, reporting to higher authorities andmonitoring of write-off/waiver cases.

The government has also asked banks to undertake new initiatives, which include appointment of nodalofficers for recovery, conducting special drives for recovery of loss assets and putting in place an earlywarning system. Banks have also been asked to replace the system of post-dated cheques with theelectronic clearance system (ECS), e-auctions, sharing of credit information through CIBIL, assigning ofloss assets on incentive basis to asset reconstruction companies and giving weightage to recovery of NPAs

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in the statement of intent on annual goals of public sector banks.

============================================

Where caution is welcome

C. R. L. NARASIMHANSHARE COMMENT (2) PRINT T+There has been considerable media interest in the apparent differences in the approach of the FinanceMinister and the Reserve Bank of India (RBI) over the issue of new bank licences. While the former isreportedly keen on the RBI speeding up its process of issuing new licences, the latter would first like to beefup existing regulation in order to be a more effective regulator when the sector is further opened up. TheRBI specifically wants to equip itself with powers to supersede the boards of banks in case the situation sowarrants.

Differences

The so called differences between the Finance Ministry and the RBI are over the timeframe for issuing newbank licences. The larger issue of whether new private banks should be licensed at all has long since beensettled. In his 2010 budget speech, the then Finance Minister, Pranab Mukherjee, mentioned the possibility

of issuing licences for opening a few new banks to the private sector, to be promoted by non-bankingfinance companies (NBFCs) and industrial houses. Banks promoted by NBFCs are not new, and thegovernments decision to allow a few more NBFCs to start banks is in line withexisting policy. However,enabling industrial houses to start banks is controversial for a variety of reasons.

(1) The reform era that began in the 1990s saw the entry of new private banks. Following the NarasimhamCommittee recommendations, new private banks, very adequately capitalised and having the latesttechnology platforms, were allowed in. Ten new banks made their appearance in the mid-1990s while twomore Kotak Mahindra and the Yes Bank were given licence in 2002.

The question, therefore, is not about private banks per se but over the entry of those promoted by industrialhouses.

(2) There are both historical and contemporary reasons pointing to the need for a cautionary approach.Almost all the leading public sector banks of today Bank of Baroda, Bank of India and Punjab NationalBank were in the private sector. All of them were either promoted by large industrial houses or hadsignificant connections with them. The two-stage bank nationalisation that began in 1969 was preceded bya period of social control. The official justification for both was to check what was then seen to be theircommon practice of banks being at the beck and call of their promoters, indulging in cross-lending and nothaving any prudential restraints in their dealings with industrial houses. A second reason given was toreorient the banks towards national objectives.

Critics of nationalisation have said that the decision was a cynical one, based more on politics thaneconomics. However, after the two-stage nationalisation the second one was in 1972 for good or bad,Indian banking came to be identified with the public sector. More recently, in the 1990s, Indian banking,especially the segment confined to metropolitan areas, had a taste of world-class banking, with the advent

of the new-generation private banks. Many of the features of modern day banking that have enhanced thequality of personal banking and added to the convenience can be traced to this development. However,even though these banks have opened branches in non-metro areas, their focus has been on the metros.This point is of relevance given the policy push being given to financial inclusion. In fact, a main justificationfor the new bank licensing policy is that they will spread banking far and wide, to areas and customers so farnot covered by the financial sector. Whether recent experiences of banks, especially the new private banks,vindicate that approach are a moot point.

Although not spelt out, RBIs caution is basically confined to the entry of industrial houses into banking.

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The structure of Indian banking so far, industrial houses do not directly own a bank although in manycases they have sizable shareholding in individual banks has a lot in its favour.

Through a variety of regulatory rules, the RBI has ensured that no individual group, irrespective of itsshareholding, can control a bank.

The situation will change radically if large business houses get a direct foothold. For them, banking will notbe the core or even the main business. No matter what safeguards are put in place, it will be a herculeantask for the government and the RBI to keep a watch over the infringement of rules. Inter-connectedshareholding will stress regulators, and is not a desirable outcome of reform. That is why the RBI wantsmore powers to check possible shenanigans.

Stiff rules

The RBIs draft rules for licensing new banks are understandably stiff. The capital requirements are peggedat Rs.500 crore. Eligible private sector promoters will be entities and groups with diversified ownership,sound credentials and integrity and having a track record of at least 10 years. Those having even anexposure of 10 per cent to speculative sectors of real estate and broking over the past three years arebarred.

The RBI wants a corporate sector in which all the financial activities of the promoter group will bering-fenced from their other activities. This, it hopes, will provide a measure of comfort to the depositors ofthe new banks.

So, in the next few weeks, there might be action on the bank licensing front. Of particular interest will be theentry of business groups.

The RBIs task is not easy. No matter how stiff the qualifying standards are, it is impossible to keep a reallydetermined entity from gaming the system. Also, the subjectivity that is impossible to avoid in any guidelineswill be the loop hole.

narasimhan.crl@thehindu.co.in

==========================================

A right, not a favour

KALPANA SHARMASHARE COMMENT (1) PRINT T+Despite a liberal abortion law, countless poor rural women continue to die because of unsafe practices anddoctors who choose to interpret the law differently.The tragic death of the 31-year-old dentist Savita Halappanavar in a hospital in Galway, Ireland, on October28 has brought the issue of womens right to safe and legal abortion to the forefront yet again. Savita died inher first pregnancy even though she was within reach of a hospital with modern facilities and trainedmedical personnel. Yet, the doctors chose not to intervene because of their interpretation of the law thatmakes abortion illegal.

There are literally lakhs of Savitas in India who die during pregnancy either because they have no access tomodern medical facilities or because doctors choose not to intervene because of the way they interpret thelaw. And this happens in a country where abortion has been legalised since 1971, under the MedicalTermination of Pregnancy (MTP) Act. Yet even here, although it is the right of any woman facing the kind ofcomplications Savita did to go to a government facility and ask for an abortion, there is simply no guaranteethat she will get it. Because the ultimate decision is left in the hands of doctors who can choose to interpreteven this liberal law in different ways.

According to a recent study by the World Health Organisation and the New York -based Guttmacher

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Institute, India has the highest number of unsafe abortions in South and Central Asia. Of the 10.5 millionabortions in the region, an estimated 6.5 million abortions take place in India (2008). And of these, twothirds are unsafe abortions, that is abortions that expose the woman to infection that could even lead todeath. Although official figures cite that only 8 per cent of maternal deaths are caused by unsafe abortions,this is likely to be a gross underestimation as the link between an unsafe abortion and a maternal death isunlikely to be established in cases where health complications occur over a period of time after the abortion.

These complications include blood loss, infection and septic shock. Think of a woman in rural India whobecomes pregnant but has to seek an abortion for various reasons. She is most likely to be sent to a quackfor an abortion. If she then develops complications, chances of her getting to a medical facility in time arelow. Even if she makes it to a primary health centre, whether she will get the treatment she needs in time isa question. But in the event of her death, it is highly improbable that the cause will be linked to the earlierepisode of an abortion under unsafe conditions.

That apart, several studies in the last two decades have brought out several important aspects of womensaccess to safe abortion facilities in India. For one, a substantial number of rural women are unaware thatabortion is legal in India and that they can go to a government facility within 12 to 20 weeks of theirpregnancy. Secondly, even if aware, they would not find such facilities as most are clustered in or aroundurban areas. As a result, most rural women are left with no choice but to turn to private untrainedpractitioners, thereby risking their lives.

Even where women can access government hospitals, they have complained of long waits, humiliation atthe hands of doctors and nurses, insistence on approval of husbands even though this is not mandatory,and in the case of married women considerable pressure to undergo sterilisation after the abortion. Forunmarried women, the treatment is much worse and usually results in the young woman running away andseeking some other facility.

This year, the central government appears to have woken up to this reality in India where, despite the law,women are dying from complications arising out of unsafe or incomplete abortions. It has identified 20,000model health facilities that will provide abortion services round the clock and has prepared ComprehensiveAbortion Care guidelines. This is a baby step in a country as large as India but it is a step forward.

The bottom line is that pregnancy is not a life-threatening condition or a disease. Women, who have the

exclusive responsibility of childbirth, should not be exposed to risks that result in permanent healthcomplications or even death. At a time when advances in science have increased longevity of the humanrace, it is unacceptable that millions of women in India continue to die during the course of their pregnancyor during childbirth.

Savitas premature death should act as a wake-up call to our government too. There is no point having aliberal law if you cannot extend its reach to the women who need it; if you cannot train your doctors tounderstand and interpret the law keeping in mind the urgent need of the woman in front of them; if yourfacilities cannot provide the necessary safe and aseptic conditions that are essential; and if you fail to informwomen that access to all this is their right and not a favour that a government doctor bestows on them.

sharma.kalpana@yahoo.com

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Taking leave of our senses

VIJAY NAGASWAMI

When in love, we suspend rational judgement of the person, and this helps ensure that love is sustainedthrough the years and guarantees a lasting relationship.A recent story in The Daily Mail explained how, when in the presence of or shown a picture of someone theywere passionately in love with, most people have a fairly characteristic response. An important part of their

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brainthe frontal lobethat governs their capacity to make rational judgements, seems to shut down.Since its publication the story, though it has not exactly gone viral, has been echoed by a large number ofnews sources all over the world, both online and in print. The ironical thing is that the research study onwhich this story is based was first published in September 2000, by Andreas Bartels and Semir Zeki.Obviously, it was not considered hot enough then to be reported, but with the increasing interest on the partof the general public in the findings of scientific research concerning love, sex and relationships, itsevidently more saleable now.

The leader of this and several other such neurobiological studies, Prof Semir Zeki, is the author of severalscholarly books on the visual brain (the most recent being The Splendours and Miseries of The Brain), aFellow of the Royal Society and the Professor of Neuroaesthetics (a discipline connecting science and art,that he pioneered) at the University College, London. He has done much path-breaking research on therelationship between the human brain on the one hand and beauty, art and love on the other. I understandhe is scheduled to speak tomorrow on Neurobiology of Love and Beauty at the 25th Foundation DayCelebrations of the Centre for Cellular and Molecular Biology at Hyderabad, and am sorry that I wont beable to hear him there. But hopefully the Internet will make available the text of this talk soon enough.

Lets try to understand what precisely Prof Zekis research threw up. By using the fMRI (functional MagneticResonance Imaging) technique, researchers can see which specific part of the brain is activated when weperform certain tasks, by assessing the oxygen flow to its component parts. Zeki and his co-workers studied

the fMRI responses of 17 healthy male and female volunteers when they were shown pictures of theirromantic partners compared to pictures of their friends. They found a distinctive difference between the waypeople responded to friends and to romantic partners. While both activated the expected areas in the brainthat are associated with positive emotions, certain portions of the brain were significantly deactivated whenpictures of the romantic partners were presented. Portions of the prefrontal cortex (which governsjudgement and social behaviour) and middle temporal cortex (which regulates negative emotions) weredeactivated, as is usually the case when we are happy. But, the more interesting finding was thedeactivation of the amygdala which controls fear, sadness and aggression. Friends activated this part of thebrain, but lovers deactivated it.

Other research has also established that people in love have some chemical changes in their brains as well.There is a surge of a neurotransmitter (chemical messenger in the brain) called Dopamine which gives us afeeling of euphoria. But there's also a depletion of another neurotransmitter called Serotonin, which is why

we tend to feel easily anxious, jittery and depressed. There is also a deluge of adrenaline making our heartbeat faster, our palms sweaty, and our mouths go dry in the presence of the one we love.

So, putting this all together, when in love, we temporarily take leave of our senses. We suspend rationaljudgement, we are fearless and we think only positive thoughts. We can swing between euphoria, anxietyand depression, within minutes. Its almost like weve consumed a narcotic drug. And heres therub.Another interesting finding of the study was that the same portions of the brain that get activated by thenarcotic drug cocaine are also activated by romantic love.

The biological explanation of all of this is that a temporary suspension of their judgement of each other isdesirable to increase the likelihood of two human beings to reproduce. But in our country, we seem to bedoing rather nicely without this. Which is probably the basis for the derogatory conclusion that love is blind.Or worse, that falling in love is the dumbest thing one can do. However, I suspect that this suspension of

judgement is a very useful mechanism to ensure that love can sustain through the years and make for alasting relationship. For most relationships break because we judge each other too harshly, based on ourexpectation that our partner should be perfect in order to cater to all our needs throughout our lives. I alsosuspect that if fMRIs were done on Indian mothers when it comes to their sons or Indian fathers when itcomes to their daughters, a fair number of them might well show significantly deactivated prefrontal lobes.

As I write this, my wife and I have just completed 25 years of being married to each other, during whichperiod we have kept our prefrontal cortices pretty busyactivating and deactivating them on a regular basisto the point that they have pretty much given up now, and remain in a state of irreparable deactivation,thereby increasing the likelihood that were going to remain in a state of mutual happiness till death do us

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part.

Love may be blind. It may be dumb. But whatever anyone else says, theres nothing quite like it.

www.vijaynagaswami.com

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Triple whammy

C. R. L. NARASIMHANSHARE COMMENT PRINT T+It is fairly common nowadays to receive unflattering reports on the economy. After all, the slowdown in theeconomy is all too evident. Periodic reports, both official and unofficial, have recently tended to focus on thenegative aspects. However, receiving three sets of worrisome economic data on the same day is somethingunusual.

On November 12, the monthly industrial output data, retail inflation for October as well as the trade figuresfor that month were released.

All of them reveal facets of the slowdown, and the challenges policy-makers face at this juncture.

FOREIGN TRADE

To take the trade figures first, during October, merchandise trade deficit, the excess of imports over exports,was $21 billion, a record for any individual month. For the April to October 2012 period, cumulative tradedeficit has gone up to $110 billion. At this rate, barring any major change in the trends of exports andimports, it could easily touch $200 billion, even higher than the $185 billion last year. India has generallyimported more than it exported. Trade deficit on merchandise account is the rule. But apart from its sheersize what makes its present level menacing are the following:

Oil and gold imports account for a substantial part of the import bill, and their share has been rising. Theseare not unusual. Petroleum imports are inelastic, not susceptible to changes in price.

Gold imports, which surged ahead of the festival season, might possibly moderate but the long-termsolution to reduce its imports is to condition domestic demand for it.

Encouraging financial savings in the place of buying gold or the jewellery is one possible solution but for along time to come, the fascination for physical gold among households will not cease.

What matters equally are non-oil imports, which have, over April-October, declined by 82 per cent evenwhile oil imports are up. Imports of capital goods, intermediate products and other items needed forinvestment in India have declined along with other non-oil imports. This is interpreted to be a sure sign ofthe slowdown.

Indian exports have been affected by the continuing economic woes of the U.S. and the European Union,

which remain the two principal markets.

Under the current foreign trade policy regime, India has sought to diversify its trade to non-traditionalmarkets and to products, but with world trade itself contracting, such strategies might pay-off only whenmore normal conditions return.

Another interesting feature has been the impact of rupee movements on Indias trade volumes.

Normally, a weaker rupee should give a fill ip to exports but this time rupee depreciation does not appear tohave benefited. Reasons for this are worth examining in detail but one plausible explanation might be that

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amidst all the volatility in the dollar-rupee exchange rate, it was not possible to manage a hedging strategy.

INFLATION

On inflation, there were two reports, both relating to October, the one on retail inflation at the beginning ofthe week and the other the monthly WPI (wholesale price index) inflation in the course of the week.

Retail inflation, based on a new, broad-based consumer index, rose to 9.75 per cent, on the back of a sharpincrease in prices of sugar, pulses, vegetable oils and edible oils.

While this seemed to vindicate the Reserve Bank of Indias (RBI) stand in not signalling a softer interestratepolicy, the news on WPI inflation which came a few days later was more positive for those clamouring forlower interest rates.

WPI inflation declined sharply to 7.45 per cent in October from 7.8 per cent in August. Especially noteworthyhas been the fact that slow demand-side pressures have caused non-food manufactured inflation (coreinflation) to decline to 5.2 per cent from a peak of 5.8 per cent in August.

WPI inflation has been the benchmark the RBI has been relying upon, even though it has admitted that it isnot the most suitable one. Recently, there have been criticisms that the RBI has not been consistent, relying

on core inflation, at times, the WPI inflation on other occasions and now the CPI inflation to justify its interestrate stance.

Rating agency Crisil thinks that food prices will go up in the near-term and that would reflect in the WPInumbers.

INDUSTRIAL OUTPUT

The third set of data released on Monday, the IIP (index of industrial production) figures for Septembershowed a contraction in industrial output of 0.40 per cent. Industrial growth during the first-half of the year(April-September) has been at a mere 0.1 per cent as against 5.1 per cent during the same period last year(2011-12).

In August 2012, the IIP was up by 2.5 per cent over last year, the only month in the July-September quarter,in which it was positive. At that time, some official spokespersons claimed that the worst was over for theeconomy. Clearly, such claims are premature.

If anything, the declines in capital goods and consumer durables do not encourage optimism.

If anything, the lower IIP might suggest a sharp decline in the GDP (gross domestic product) figures for thesecond quarter, probably even less than 5 per cent.

narasimhan.crl@thehindu.co.in

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Indias great shame

HARSH MANDEROne of modern Indias great shames is the official failure to eradicate manual scavenging, the mostdegrading surviving practice of untouchability in the country. Merely because of their birth in particularcastes, the practice condemns mostly women and girls, but also men and boys, to clean human excreta indry latrines with their hands, and carry it to disposal dumps or lakes or rivers. Many men also clean sewers,septic tanks, open drains into which excreta flows, and railway lines.

People trapped by their birth in this vocation are shunned and despised. The anonymity of cities otherwise

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may free people of the disadvantaged destinies brought on by their caste identity, because their caste is notwritten on their foreheads. But manual scavengers are branded irrefutably by the loathed work which theyperform.

Forty-three years after its prohibition in the Constitution, in 1993, a law was passed which outlawed thepractice. But it was a feeble and toothless law, weakly and reluctantly applied. It was rescued only byextraordinary and sustained non-violent resistance by organisations of manual scavengers themselves. Ihave in these columns celebrated their collective actions to demolish dry latrines and proudly burn thebaskets in which they carried human excreta. They also moved the Supreme Court of India to compelcentral and state governments to enforce the law.

One demand of some organisations and activists was for a new and improved central law to strengthen itsaccountability mechanisms, widen the definition of manual scavenging, and above all to shift the focus tohuman dignity from merely sanitation issues. Their struggles persuaded the central government tointroduce a new legislation, which unlike the 1993 law, would be automatically binding on all stategovernments.

Particularly welcome is the acknowledgment in the preamble of the new bill, that it is necessary to correctthe historical injustice and indignity suffered by the manual scavengers, and to rehabilitate them to a life ofdignity. This stops short of the national apology which people who have suffered untold humiliation over

centuries wanted to see in the law. But a clear acknowledgement of the historical injustice suffered by themwould be a salve to their wounds.

The 1993 law defined a manual scavenger as a person engaged in or employed for manually carryinghuman excreta. The 2012 bill definition is fittingly more elaborate and inclusive, and includes a personengaged or employed... for manually cleaning, carrying, disposing of, or otherwise handling in any manner,human excreta in an unsanitary latrine or in an open drain or pit into which the human excreta from theinsanitary latrine is disposed of, or on a railway track...

But the advantages of the expanded definition are completely undone by the proviso that a person whocleans excreta with the help of such devices and using such protective gear, as the Central Governmentmay notify in this behalf, shall not be deemed to be a manual scavenger. No such proviso was there evenin the 1993 law. It deliberately introduces a huge escape route: employers may merely issue gloves and

protective clothing, which the Central Government notifies as sufficient, and this would be sufficient to allowthe demeaning practice to persist.

Bring in innovations

The 2012 Bill explicitly prohibits construction of dry latrines, and employment of manual scavengers, as alsothe hazardous cleaning of a sewer or a septic tank. But cleaning railway tracks has not been included, andhazardous cleaning is defined not by employers requiring workers to manually clean sewers or septictanks, but requiring them to do so without protective gear. Our objection to manual cleaning of sewers andseptic tanks is not just of compromising worker safetywhich is no doubt importantbut of humanindignity, which would continue even if such manual cleaning is done with protective gear. And it isunconscionable to let the railways off the hook.

For sewer workers and railway workers, liberation will come by introducing technological changes which willrender the occupation humane, dignified and safe, and also ensure that human beings do not have to makeany direct contact with excreta. Technologies are available globally which both the Indian Railways andmunicipalities could invest in, which would obliterate the requirement for human beings to manually handleexcreta. The fact is that central, state and local governments do not make these public investments,because human beings are available to perform this work cheaply, propelled by their birth in mostdisadvantaged castes and lack of other livelihood options.

The 2012 bill places a duty of survey on all local authorities, but the past experience is that StateGovernments are mostly in denial. They usually reject community findings, even when backed by strong

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evidence. This can be prevented only if there is a continuous system of joint surveillance, beginning with ajoint survey by designated teams of government officials and community members.

The 2012 bill fittingly mentions rehabilitation in the title itself. But it does not take us much beyond earlierrehabilitation programmes which were introduced from 1993. The law should explicitly guarantee fullygovernment funded school education for every child of school going age, with scholarships for highereducation, and vocational and computer training.

Given the past experience of corruption and harassment in loans, and the fact that most manualscavengers are women, many of whom are older and with poor literacy, the scheme should be entirelygrant-based. Women should have the option of receiving a monthly pension of Rs 2000, or an enterprisegrant of up to Rs 1 lakh, supported by training and counselling facilities. Highly subsidised housing shouldbe ensured in mixed colonies.

Public officials have frequently failed in their duties to identify, report and end manual scavenging, demolishdry latrines, and rehabilitate manual scavengers, and on their shoulders rests major culpability for thecontinuance of the unlawful and unjust social practice. The bill must introduce the offence of dereliction ofduty by public officials under this statute, and prescribe deterrent consequences for these failures.

This new central law presents the people of this country one more chance to remedy an enormous historical

wrong, of enslaving our people to painful lifetimes of humiliation and hopelessness. We should not allowanother deliberately weak law to postpone once again our collective obligation to end one of modern Indiasgreatest shames.

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FDI in banking

C. P. CHANDRASEKHAR

As the next session of Parliament approaches, the Prime Minister and the Congress Party seem adamantabout further advancing their programme of financial liberalisation. Controversial among their favouredreforms is a change in the rules governing foreign investmentin Indias banking sector. Opposition to this

move was one of the issues motivating a two-day strike by around a million bank employees in August thisyear.

But those advocating liberalisation of governance regulations in the form of equity caps for foreignshareholders and caps on voting rights for both domestic and foreign investors are unwill ing to listen. Theyoften even suggest that this is an area in which reform has been almost absent or creeping, and isrestricting the ability of private banks to mobilise foreign capital to enhance their capital base. But are theyright?

The fact of the matter is that governance rules in the banking system have indeed been changed toaccommodate the private investor (domestic and foreign) after liberalisation. Besides permitting the entryand consolidation of new private banks, the government (through the Ministry of Commerce) had as farback as March 5, 2004, announced a set of decisions with reference to foreign investment in the banking

sector, which relaxed the cap on foreign equity in Indian banks to 20 per cent in the case of public sectorbanks and 74 per cent in the case of private banks. This was in addition to the permission granted to foreignbanks to operate in the country through wholly owned subsidiaries subject to increasingly relaxed rules.

Consequent to the Ministry of Commerce announcement, the Reserve Bank of India issued a more detailedand comprehensive set of policy guidelines on ownership of private banks. Recognising that the 5th March2004 notification by the Union Government had hiked foreign investment limits in private banking to 74 percent, the guidelines first clarified that this ceiling was applicable to the sum total of foreign investment inprivate banks from all sources (FDI, Foreign Institutional Investors, Non-Resident Indians).

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More importantly, in the interests of diversified ownership the guidelines had declared that no single foreignentity or group could hold more than 10 per cent of equity. There was also a 10 per cent limit set forindividual FIIs and an aggregate of 24 per cent for all FIIs, with a provision that this can be raised to 49 percent with the approval of the Board or General Body. Finally, the 2004 guidelines set a limit of 5 per cent forindividual NRI portfolio investors with an aggregate cap for NRIs of 10 per cent, which can be raised to 24per cent with Board approval.

Finally, in keeping with this more cautious policy, the RBI decided to retain the stipulation under the BankingRegulation Act, Section 12 (2), that in the case of private banks the maximum voting rights per shareholderwill be 10 per cent of the total voting rights (1 per cent for public banks). The 10 per cent ceiling on equityownership by a single foreign entity was partly geared to aligning ownership guidelines with the rule onvoting rights.

The response to this from liberalisation advocates was that the whole exercise was pointless inasmuch asthe ceiling on single investor ownership and voting rights would deter foreign investors. The evidenceshows that this expectation has turned out to be completely false. As Chart 1 shows, the share of foreigninvestors in private bank equity exceeds 50 per cent in five banks and stands at between a third and a halfin another eight. Moreover, Chart 2 shows that in a number of instances the share of foreign equity hasincreased between 2005 (when the guidelines had come into force) and 2012.

Problems arose only in the case of those entities in which single foreign entities held more than 10 per centequity. This was, for example, true of the Development Credit Bank (which had the Aga Khan Fund forEconomic Development as lead shareholder with around 25 per cent of equity) and the Catholic SyrianBank (in which Surachan Chawla of the Siam Vidhya group from Thailand had acquired 36 per cent sharesin the 1990s and has since been able to reduce the total to only 21 per cent). The problem faced by theseentities is that of finding buyers willing to acquire small blocks of equity to ensure adequate dilution of leadstakeholder ownership in a bank being run by a dominant foreign shareholder. As a result they have beenunder pressure for not complying with the RBIs demand to dilute equity and faced with threats of penalaction.

The implication of this is clear. The problem with well-performing private banks is not that it is difficult toattract foreign equity investment. The problem is that current rules do not allow entry of those whose intentis to exercise control over a local bank with an adequate share holding and equivalent voting rights. Hence,

if the need is to allow foreign equity infusion to meet prudential requirements such as the Basel norms thatis still possible. What is not allowed is the entry of single foreign investors seeking to establish or acquiredomestic private banks with a controlling stake and voting rights.

The case for such regulation of foreign presence had been clearly specified in the past. The RBI has forlong strongly advocated diversified ownership of banks. The RBIs Report on Trend and Progress ofBanking in India, 2003-04 states: Concentrated shareholding in banks controlling substantial amount ofpublic funds poses the risk of concentration of ownership given the moral hazard problem and linkages ofowners with businesses. Corporate governance in banks has therefore, become a major issue. Diversifiedownership becomes a necessary postulate so as to provide balancing stakes.

A more elaborate exposition of the RBIs views on the matter came from Rakesh Mohan, a former DeputyGovernor of the RBI. In a speech made at a Conference on Ownership and Governance in Private Sector

Banking organised by the CII at Mumbai on 9th September 2004 he remarked:

The banking system is something that is central to a nations economy; and that applies whether the banksare locally-or foreign-owned. The owners or shareholders of the banks have only a minor stake andconsidering the leveraging capacity of banks (more than ten to one) it puts them in control of very largevolume of public funds of which their own stake is miniscule. In a sense, therefore, they act as trustees andas such must be fit and proper for the deployment of funds entrusted to them. The sustained stable andcontinuing operations depend on the public confidence in individual banks and the banking system. Thespeed with which a bank under a run can collapse is incomparable with any other organisation. For adeveloping economy like ours there is also much less tolerance for downside risk among depositors many

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of whom place their life savings in the banksHence diversification of ownership is desirable as alsoensuring fit and proper status of such owners and directors.

It is evident that the RBI, which is the regulator of the banking sector, had a strong case for issuingelaborate guidelines on bank ownership to ensure diversification. Those reasons retain their relevanceeven today. So there is no case for altering them, especially if the evidence suggests that accessing foreignequity, if needed, to enhance the capital of banks is possible within the current regulatory framework.

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Risk management, a serious business

C. R. L. NARASIMHANSHARE COMMENT PRINT T+A very erudite speech on the topic "Managing currency and interest rate risks" was delivered by Harun R.Khan, Deputy Governor of the Reserve Bank of India, at a seminar in Bombay recentlyFor banks and their corporate customers, management of currency and interest rate risks has always beena daunting but absolutely vital task. It has become particularly challenging today. The global financial crisisthat began in 2007 has vastly exacerbated the market risks. There has been an exponential increase involatility both in terms of dimension and direction in all classes of financial assets. In the new environment,

institutions both financial and non-financial have to reckon with movements of currency and interestrates in ranges hitherto not seen and certainly not anticipated. Almost all the conventional andnon-conventional methods of containing risks failed, some, as in the case of U.S. housing market,spectacularly and with disastrous consequences for the entire world.

A very erudite speech on the topic Managing currency and interest rate risks was delivered by Harun R.Khan, Deputy Governor of the Reserve Bank of India, at a seminar in Bombay recently.

Pointing out how financial market risks affected the real economy, he said that the big increase in volatilityhad induced uncertainty which, in turn, had a negative impact on the real economy as well. Financial andnon-financial companies, unable to anticipate their future, are adopting a more cautious approach to theirbusiness planning and employment policies.

Heightened volatility, the new normal?

It is unlikely that volatility will subside anytime soon. In the post-crisis period, the global economy wasinitially propelled by the big developing economies which more than offset the lacklustre performance of theadvanced economies. However, the global slowdown has now caught with India and China, too. TheInternational Monetary Fund (IMF) is just one of the global institutions to lower its forecast for the worldeconomy during the current year.

The slowdown has created uncertainty, which, in turn, had to be countered by some highly unconventionalmonetary and fiscal policies in the advanced economies. For instance, the extremely loose monetary policyfollowed by the American Federal Reserve, has the potential to flood the global economy with liquidity. Thatwill have as yet unknown consequences. Global commodity prices could go up, in turn, fuelling importedinflation in countries such as India.

On the other hand, India might be able to tap global capital flows to a larger extent than now. However,given the all-pervasive uncertainty, capital inflows will also be volatile. This is already having repercussionson the exchange and money markets in India.

Indias growing integration with the rest of the world is another factor. It is no longer possible to sh ield thedomestic economy from the vagaries of the global economy. Global risks are now easily transmitted to theIndian economy through a variety of routes trade, finance, commodity prices and confidence channels.The end result is always heightened volatility.

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The government and the RBI have taken a number of steps to help banks and corporates deal with thevolatility. Most of these aim to increase the supply of dollars to hopefully iron out fluctuations.

But this might be a case of being extremely short-sighted. For instance, the measures to encourageshort-term external debt flows will cause serious funding mismatches if used for long-gestation projects.They might also lead to a ballooning of debt repayments over the near-term. In that event, interest andexchange rate risks will increase."

RBIs genuine concerns

Measures to augment supply of foreign exchange are one aspect. But the RBIs current worry is two fold. (1)Many corporates are deliberately or out of ignorance not hedging their foreign currency exposures.According to recent estimates, almost 50 per cent of total outstanding exposures are unhedged. This is analarming situation. It can not only devastate the concerned companys balance -sheet but can pose majorthreats to the macro economy.

(2) Closely related are the second set of worries which arise from the fact that many companies areexploiting the rules to speculate rather than hedge. For some of these companies, foreign exchange riskmanagement becomes a profit centre, akin to whatever core business they have. In its most basic form,exposures are left unhedged, the objective being to (hopefully) profit from exchange rate movements.

Given the current volatility, many of those hopes have come crashing down. Over the past few years,derivative instruments have been used for generating profit rather than to mitigate risks. In nearly all thecases, companies, which gambled on exchange rate, have come to grief.

There is obviously a case for educating customers on the dangers of misusing hedging instruments as wellas sterner steps. The RBI has recently suggested that banks should monitor the unhedged positions of theirlenders and, if need be, penalise them by charging a higher rate.

In its recent credit policy review, the RBI has pointed out that large unhedged foreign currency exposureshave resulted in accounts becoming non-performing assets (NPAs). They are, therefore, a risk to them aswell as the financial system. A stringent monitoring of the exposures is, therefore, called for. Among othermeasures, banks can consider stipulating a limit on unhedged positions of corporates on the basis ofpolicies approved by respective bank boards.

narasimhan.crl@thehindu.co.in

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Power games

VIJAY NAGASWAMISHARE COMMENT PRINT T+Both nature and nurture create a complex template that determines who will dominate in dyadicrelationships.

It has become a modern aphorism that all relationships are essentially power struggles. One can readily

see how this would apply in the case of political relationships, corporate relationships, institutionalrelationships and the like. But when it comes to inter-personal relationships, this may appear to be a cynicalobservation. However, the more one thinks of it, the more likely is one to appreciate that this belief is notentirely devoid of merit.

Looking around, one can see that in most dyadic relationships (those involving two people), there is thetacit, often explicit, assumption, that one of the two has a casting vote. Whether between parent and child,man and woman, boss and subordinate, teacher and student, sibling and sibling, friend and friend orservice provider and service recipient, most fallouts take place when one doesnt recognise or respe ct theauthority of the other, or worse, attempts to reverse the power balance in the equation. The most serene

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relationships are those in which the power structure is accepted unquestioningly by both partners in thedyad, and both can therefore be relatively true to their respective selves and each other within theframework of this acceptance.

For millennia, in our country certainly, patriarchy has been accepted as an incontrovertible bedrock ofcultural existence, except in certain pockets, where matriarchy ruled the roost. While this is slowlychanging, whatever else the khap panchayats may want to believe, the fact that in the most intimate ofdyadic relationships, one gender had be in control of the other, represents the nucleus of this issue. Thisphenomenon extends itself to other less intimate relationships as well. Even within the same gender, therestill exists a pecking order between the two participants in the equation, determined by the predefinedauthority that is traditionally vested on the prescribed role each is playing. The one whos less powerful isalways expected to play the subordinate role in the relationship. Which is why regardless of strengths orweaknesses, the boss is always right, or the husbands word is law, or the brother is more equal than thesister. In other words, for a relationship to proceed smoothly, everyone has to know their respective placesand function within these perimeters.

The cycle goes on

In more orthodox societies such as the one we live in, social roles are clearly institutionalised, andviolations are easily identifiable. But in modern societies, which have broken the barriers of

institutionalisation, new parameters to determine who has the power in a dyadic relationship are periodicallyredefined based largely on the zeitgeist of the culture one is part of. Thus, you have attributes like wealth,attractiveness, education, personality and the like that create a new class of relationship controllers; thericher, more attractive, the better educated and the more extroverted one is, the more the balance of powershift in ones favour. What is ironical is that the attempt to break the shackles of rigid control mechanismslike patriarchy, has resulted not in a state of classlessness, which one would imagine was the primary goalof rebellion, but in the emergence of new and equally rigid classification processes. Tomorrow, newparameters that define power-structures in relationships are bound to emerge. And so the cycle will go on.

But why should it happen in the first place. Is it just learned behaviour? Or is it hard-wired into us, part of ourDNA? Certainly control or dominance is something we engage in instinctively without being taught. Buteven if its been drilled into us that by virtue of having certain attributes we can be dominant in a relationship,its not uncommon to see men who are controlled by women or a younger sibling taking the one-up position

over an older one or children who grew up in an ambience of pacifism turning out to be chauvinistic andintolerant. I would imagine that both nature and nurture together create a fairly complex template in the backof our minds that determine how we will behave in dyadic relationships.

But why do we need to have power in relationships? I believe that the closer and more intimate therelationship, the more dependent is one person on the other, whether financially, emotionally, physically orsexually. And when there exists a lack of reciprocity or mutuality, one partner is seen as needing the othermore. The more needy one feels the other is, the more likely is one to take the upper hand in therelationship. Some do it gently, some boorishly, and some even unconsciously. But we all do it, howeverevolved we may think ourselves to be, bolstered by the benevolent dictator argument which rationalisesdominance on the basis of good intentions.

However, if we are not conscious of the power games we play with each other, or if the balance of power in

a close or intimate relationship is permanently tilted in favour of one person over the other, a fallout iswaiting to happen. But if we consciously work towards having a reasonably stable power structure in arelationship, then our power games can actually be fun (as games are meant to be), instead of resulting inpower outages, as sadly, they so often tend to.

www.vijaynagaswami.com

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A step closer to Palestine

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The Palestinian bid to become a non-member Observer State at the United Nations has been, as expected,approved by an overwhelming vote of 138 to nine, with 41 abstentions in the General Assembly. The voteimplies global recognition of the relevant territory as a sovereign state and is a major step towards atwo-state solution for historical Palestine. The new status amounts to less of an achievement than full U.N.membership, which the Security Council declined to consider in September 2011 on the grounds that themembers were unable to make a unanimous recommendation, but the Palestinians can now participate inGeneral Assembly debates. In sum, this is an important move towards Palestinian statehood, which 132countries have already recognised. As for particular countries, one former colonial power, France, voted infavour, and the other state with a previous imperial connection to the region, the United Kingdom,abstained, as did Germany. Predictably, Israels biggest supporter, the United States, opposed theresolution, reconfirming its view that a negotiated settlement is the only way to establish a Palestinian state.

The U.N. resolution, however, could well be the first of many momentous changes for West Asia. ThePalestinian Authority can now seek membership of several U.N. agencies and, above all, can apply to signthe Rome Statute of the International Criminal Court, with the clear implication that Israel may finally be heldaccountable for crimes committed against the civilian population of Gaza. Secondly, differences haveemerged between Washington and major European countries over Israel-Palestine, even if some Europeanofficials call criminal charges against Israel a red line. Thirdly, it is consistent with global public opinion;even U.S. opinion polls show majorities for a two-state formula. It also testifies to the increasing confidenceof Palestinian representatives, who have said that continued exclusion would strengthen support for

Hamas; the representatives, moreover, now know that the regions peoples demand justice for thePalestinians and can no longer be ignored. The vote will be truly meaningful if it marks the start of a newinternational resolve to ensure the people of Palestine are able to exercise their right to statehood andself-determination, just as the people of Israel have been doing for years. The first order of business has tobe to stop the Israeli stranglehold over occupied Palestinian territory, including the monstrous policy ofbuilding settlements. As long as the international community gives Tel Aviv a free pass on these issues,peace and security in Israel-Palestine will always remain elusive.

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Medias Leveson momentEnding months of feverish speculation, Lord Justice Leveson has finally given his verdict on the Britishpress and it does not make comfortable reading either for journalists or politicians. The Financial Times

called it a damning indictment of the culture and practices of the newspaper industry. And The Timeswhose sister paper, the now defunct News of the World, caused the phone hacking scandal that led to theinquiry, credited Lord Leveson with correctly identifying the lapses in moral and professional standards ofthe press. His 2000-page report longer than Harry Potter, shorter than Proust, denser than Tolstoy, asthe Guardian put it lambasts the media for its reckless and outrageous behaviour and accuses it ofhaving wreaked havoc in the lives of innocent people for many decades. Politicians get a sharp rap on theknuckles for developing too close a relationship with the press in a way which has not been in the publicinterest. Yet, for all the apparent sound and fury, the report is more significant not so much for what it saysbut for what it does not say.

During the hearings, Lord Leveson made some strong observations about the need for a radically newregulatory regime. This sparked speculation that he was likely to recommend a strong dose of statutoryregulation. It was widely thought that he might bow to pressure from victims campaign groups such as

Hacked Off and go for the nuclear option a press law. In the end, though, he settled for a sensiblemiddle course between the discredited current system of self-regulation and state regulation. He wants thecreation of a new regulatory body which would be truly independent of the newspaper industry and thegovernment, but backed by legislation. He stressed that this did not imply state control. The proposedlegislation was not meant to establish the new body but only to recognise an independent regulatoryregime as the public had no confidence in the industry-controlled Press Complaints Commission. While theOpposition Labour Party and the governments junior coalition partner, the Liberal Democrats, haveenthusiastically embraced the proposal, Prime Minister David Cameron believes it has the potential toinfringe free speech and the free press, a view not shared by many of his own MPs. Eventually what willcount is public opinion and it is overwhelmingly in favour of the Leveson proposal, leaving Mr. Cameron

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looking like the odd man out. The report will find resonance in India too, where calls for media regulation aregrowing louder. Indeed, before it is beset with its own hacking scandal, the Indian media should see whatlessons it can draw from the Leveson report.

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Growing crisis of drug prices

Indias drug price control order, which is vital to the availability of affordable essential medicines, has beenwhittled down to the point of becoming insignificant. While the number of price-controlled medicines hasdwindled over the past three decades, from 347 to 74, the pharmaceutical industry has been pursuing superprofits. The High Level Expert Group of the Planning Commission on Universal Health Coverage noted in itsreport that price variation of therapeutically similar drugs based on brand could be as much as 1,000 percent in the market; low official procurement prices for similar drugs were found to vary by a staggering 100to 5,000 per cent in relation to market prices. Given these trends, it is unsurprising that 74 per cent ofout-of-pocket spending on health by Indians is towards medicines. The distressing reality is that millions gowithout medications because they cannot afford them and they are not available free from governmentfacilities. Activists have justifiably sought the intervention of the Supreme Court, and the Centre has theresponsibility to act quickly. At this stage, it ill-serves the goal to merely expand the National List ofEssential Medicines, without arriving at a rational price control formula. Here, the system of cost-based

pricing with provision to add post-manufacturing expenses can be built upon, since ingredient and othercosts are transparent under declarations made by producers for taxation purposes.

Direct control of drug prices is unavoidable in India because the option of indirect control at the time ofprocurement by public health agencies and insurers is not yet available, as in Europe and the U.S. Citizensin developed countries are insulated from the vagaries of market pricing: they either do not pay at the pointof treatment or get a cash reimbursement. But even here, there is the Tamil Nadu model under which thepharmaceutical industry supplies quality drugs at a fraction of the market price. What this proves is that theprice of a drug in the market cannot be several hundred per cent more than what is paid by official agencies.In the sample case of anti-hypertensive drug atenolol, in 2008-09 prices, a strip of tablets was procuredofficially by Tamil Nadu for Rs.1.20, while consumers bought it for Rs. 26.30 from the market leader.Clearly, the case for reform and cost-based pricing cannot be overstated. The Centre must also plugloopholes that help manufacturers evade price controls by producing combinations of essential and other

medications. A panel of professionals to examine all medicines consumed in the country must beconstituted, to prepare a more exhaustive and relevant list of essential drugs.

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Making talks meaningfulThe Chief Ministers of Tamil Nadu and Karnataka have been quick to respond positively to the SupremeCourts suggestion that they meet and find a political solution to the seemingly intractable Cauvery riverwater dispute. It ill-behoves anyone to balk at an opportunity for negotiations, regardless of the stage oflitigation, especially when the highest court in the land suggests it. Since the need to adjudicate arosebecause years of negotiations ended in failure, the advice for further talks long after a duly constitutedtribunals verdict has been delivered may seem strange. Yet, the executive has to take responsibility for thefailure of institutional mechanisms to find a solution. A provision in the Constitution, a law on inter-State

water disputes, the verdict of a tribunal formed under the law, and an authority headed by the Prime Ministerand involving the Chief Ministers of the basin States all these structural arrangements seem to fail in theface of political intransigence. Past experience shows that the dispute flares up only in years of distress andgoes dormant whenever natures bounty renders the upper riparians opinion on the timing and quantum ofrelease of Cauvery water irrelevant. As they sit down for talks on Thursday the first time since 1997 thatChief Ministers from the two States find themselves at the negotiating table it is not the political will to findan amicable solution in the interests of their farmers which brings them there; rather, they will be there at thecourts bidding, perhaps each seeing in it an opportunity to expose how intransigent the other side is.

If they wish to defy this realistic, if not cynical, assessment, they would do well to understand that this time

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they are armed with much more than good intentions to move forward: the final award of the CauveryTribunal, delivered in 2007, is available for guidance and refuge. In the upcoming round of talks, the twoChief Ministers would serve the farmers cause well if they do not stop with finding a way out of the currentyears water shortage. Here is an opportunity to move beyond the particular requirements of this season as irony would have it, the two States even disagree on what constitutes a season and hammer out alasting political solution to a dispute that persists five years after a final award which has the force and effectof a Supreme Court decree. They could accept broadly the terms of the award which apportions the waterestimated to be available in the Cauvery basin among the four riparian States and look for ways toimplement it. Only a meaningful agreement on operationalising the final award during normal years andsharing distress pro rata in years of shortage is the way out.

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Morsy decrees trouble

Egyptian President Mohamed Morsys November 22 decree awarding himself vast new powers has bothstirred up a political hornets nest and demonstrated the uncertainty and difficulty of the transition to consolidated democracy of one of the most important countries in the Arab world. The decree, which criticssay is akin to former dictator Hosni Mubaraks laws and may even go beyond any of them, gives Mr. Morsythe power to enact any law he wants, and in effect removes the current prosecutor general, so that no

authority can now revoke any presidential decision; the President also gets the power to appoint a newprosecutor general for a four-year term. The edict, claimed by Mr. Morsy to be a way of cleans ing publicinstitutions, will remain in force until a new parliament is elected but that cannot be done until a newconstitution is drafted and Mr. Morsy has also extended the timeline for that process. The Presidentissued the decree of his own accord, without consultation, in a move that has been likened to the FreeOfficers coup in 1954 and amounts to a sidelining of the judiciary. It is a contemporary version of a HenryVIII clause.

Substantial sections of the Egyptian public have, understandably, been horrified by the Morsy edict, andhave taken to the iconic Tahrir Square; some of the initial protests, including those in Alexandria, turnedviolent as members of the Muslim Brotherhood, parent body to Mr. Morsys Freedom and Justice Party,confronted them, and at the time of writing four people have died. The judiciary, for its part, has gone onstrike, and most courts are closed. The President says he means the new powers to apply only to

sovereignty-related issues, but that is at best vague; the judiciary, for its part, is widely distrusted for itsrole during the 30-year-long Mubarak regime, and the Presidents announcement of a special judicial groupto reopen the trials of former members of the dictatorship may not go far enough. Mass demonstrations areplanned, but for the present most of the public apparently do not wish open confrontation to go too far. TheMuslim Brotherhood has abandoned plans for counter-demonstrations, and there are grounds for someoptimism. Mr. Morsys dismissal of the senior military has reduced the armys influence. Secondly, thedecree has united the democratic opposition, including liberals, leftists, and other groups, in a new NationalSalvation Front. The key point is that Mr. Morsys decree is simply not a subst itute for genuine democraticreform of major public institutions. That is where the real work lies.

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The plot thickens

Not for nothing has Ram Jethmalani earned the sobriquet Battering Ram. The veteran lawyer and BharatiyaJanata Party member loves a good fight, a behavioural trait that has caused him often to clash with his partyleadership. So at one level his suspension from the BJP followed by a show-cause notice is just areplay of history. Yet this time round there appears to be a conspiratorial backstory to Mr. Jethmalanisrebellion which has clearly unsettled party president Nitin Gadkari and his backers, among them theideological high priests at Jhandewalan. The senior Jethmalani straddles both sides of the ideologicaldivide. If in his heyday he defended terror convicts with some lan, more recently he upset the legion ofHindutva warriors with his outbursts against Lord Ram. As against this, Mr. Jethmalanis curren