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TESTCRACKER

THE BURNING ISSUES


Current Affairs Digest

Complete Coverage of the most Important National &


International Issues

ISSUE

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INDEX

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TOPIC
By Syria, Of Syria, For Syria
India, Japan & the Bullet Train
Killing the Killer Robots
India grew at 5%
Murthy returns to Infosys
All about Asteroids
Inflation Indexed Bonds vs. Gold
RTI applicable to Political Parties
Latvia is the Eighteenth
Gezi Park & the Woman in Red Dress
The never-ending Vodafone tax case
The end of TRP
Big Brother is watching you
RBI fines three banks
Chinas Race into Space
Rupee falling free
Food Security Act the time has come
The Next President of Iran
RBI does not cut rates
Afghanistan without the US
Flash Floods in North India
Pay through RuPay
Assanges Anniversary
Diplomatic Immunity
The Secretary of State is in India
Man Made Disaster or Natures Fury?

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Current Affairs

By Syria, Of Syria, For Syria


The UN estimates that more than 80,000 people have been killed and 1.5 million have fled Syria
since the uprising against Bashar Al Assad began in 2011. The crisis sees no end. In fact, now it
threatens to involve the rest of the world at least most of the world has got involved. The
European Union (as if it has less of its problems to deal with) has lifted its arms embargo on Syria
virtually allowing the European Union nations to give weapons to the outgunned rebels. Within
hours, Russia, always a staunch supporter of the Syrian government, that it will go ahead with
deliveries of the powerful S-300 anti-aircraft missiles to Syria, and that these arms will help deter
foreign intervention. In an indirect reference to the EU nations, Russia said that the missiles were a
"stabilising factor" that could dissuade "some hotheads" from entering the conflict. Israel answered
Russias pledge by warning that it would be prepared to attack any such missile shipments. The US,
never to be left behind in matters of interfering with other countries, has sided with the EU and
criticized Russia. Syria is dividing itself into many parts and the world into two the Assadians and
the anti-Assadians! We look at Syria in the wider context of what was once the Arab Spring.
The crisis in Syria
The Syrian civil war is an ongoing armed conflict in Syria between forces loyal to the Syrian Ba'ath
Party government and those seeking to oust it. The conflict began on 15 March 2011, with popular
demonstrations that grew nationwide by April 2011. These demonstrations were part of the wider
Middle Eastern protest movement known as the Arab Spring (which seems to have entered winter
now!). Protesters demanded the resignation of President Bashar al-Assad, whose family has held
the presidency in Syria since 1971, as well as the end to over four decades of Ba'ath Party rule.
In April 2011, the Syrian Army was deployed to suppress the uprising, and soldiers were ordered to
fire on demonstrators across the country. After months of military sieges, the protests evolved into
an armed rebellion. Opposition forces, mainly composed of defected soldiers and civilian volunteers,
became increasingly armed and organized as they unified into larger groups. However, the rebels
remained fractured, without organized leadership. The Syrian government characterizes the
insurgency as an uprising of "armed terrorist groups and foreign mercenaries". The conflict has no
clear fronts, with clashes taking place in many towns and cities across the country. The Arab League,
United States, European Union, and other countries have been condemning the use of violence
against the protesters. The Arab League suspended Syria's membership because of the government's

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Current Affairs

response to the crisis, but granted the Syrian National Coalition Syria's seat on 6 March 2013. Assad
has been unsuccessfully trying to prove to the world that his opponents are also committing
excesses and he is left with no choice but to use firepower.

The Free Syrian Army (FSA) is the main armed opposition in Syria. Its formation was
announced in late July 2011 by a group of defecting Syrian Army officers. Many Syrian
soldiers subsequently deserted to join the FSA. The FSA functions more as an umbrella
organization than a traditional military chain of command, and is "headquartered" in Turkey.
As such, it cannot issue direct orders to its various bands of fighters, but many of the most
effective armed groups are fighting under the FSA's banner.
Jabhat al-Nusra, being the biggest jihadist group in Syria, is often considered to be the most
aggressive and violent part of the opposition. Being responsible for over 50 suicide
bombings, including several deadly explosions in Damascus in 2011 and 2012, it is
recognized as a terrorist organization by Syrian government and was designated as such by
United States in December 2012. It owes allegiance to Al Qaeda and this is what the Syrian
government keeps highlighting that far from being a movement for democracy, this is
spearheaded by Al Qaeda.
The fading Arab Spring

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Current Affairs

In December 2010, a man in Tunisia burned himself to death in protest of his mistreatment by
police. Very soon, many countries of the Middle East and North Africa (Tunisia, Egypt, Libya, Bahrain,
Yemen and Syria) witnessed pro-democracy rebellions. Collectively, they are called the Arab Spring.
The term broadly includes demonstrations, protests, and wars occurring in the Arab world against
the ruling elite. In 2013 (as in 2012 and 2011), Syria has been at the center of this revolution with the
Syrian President Bashar Al Assad getting into a military confrontation with the rebels and the rest of
the world discussing how to put an end to this situation. Another twist to this movement has been
the failure of the newly elected civilian governments in a few countries to live upto the hopes of the
people. In Tunisia and Egypt, for example, post-revolution politics has been dominated by Islamist
groups. President Mohamed Mursi of Egypt had granted himself sweeping powers to override any
objection to his orders. This sparked protests against the President, who, not very long back, was the
result of the revolution! The President was then forced to give up those powers.
To date, rulers have been forced from power in Tunisia, Egypt, Libya, and Yemen; civil
uprisings have erupted in Bahrain and Syria; major protests have broken out in Algeria,
Iraq, Jordan, Kuwait, Morocco, and Sudan; and minor protests have occurred in Lebanon,
Mauritania, Oman, Saudi Arabia, Djibouti, and Western Sahara.
Why is the Syrian crisis seeing no resolution?
In Libya, because of the United Nations Security Council (UNSC) resolution, foreign powers provided
open support to the rebels that helped in bringing the regime down. In Egypt, the countrys top
leaders quit themselves due to the uprising. However, in Syria, world powers are divided. Two
Resolutions by UNSC were vetoed by China and Russia, because they feel any outside interference
will violate Syrias sovereignty.
Simply put, Assad has powerful backing from China and Russia who seem to have learnt a
lesson from what happened in Libya and are determined not to let the US and the EU have
their way in Syria.
Syria has become the center of discussion in international circles because it is a major player
in the Middle East. Any trouble here could cause ripple effects in countries such as Lebanon
and Israel, where it can mobilise powerful proxy groups, such as the militant Hezbollah
and Hamas movements. It also has close ties with Shia power Iran - an arch enemy of the
US, Israel and Saudi Arabia - which could potentially draw those powers into a dangerous
Middle Eastern conflict.
The consequences of the latest developments could be dangerous

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Current Affairs

These developments could significantly raise the firepower in a two-year civil war that has already
killed more than 80,000 people in Syria and sent hundreds of thousands fleeing the country. It also
comes as the U.S. and Russia are preparing for a major peace conference in Geneva next month
that diplomats have called the best chance yet to end the bloodshed under Syrian President Bashar
Assads regime. France and Britain, which are considering sending military equipment to the rebels,
hope the new EU position can help nudge the two sides to the negotiating table in Geneva. That is
extremely unlikely. For a government that has shown every sign of determination to fight to the end,
it is hard facts on the ground that matter more than any EU resolution.
Israeli Defence Minister has already warned, I hope they (S-300) will not leave (Russia), and
if, God forbid, they reach Syria, we will know what to do.
France and Britain are yet to conclusively prove that Assad has used chemical weapons in
the civil war something which they have been vehemently alleging since a month now.
The S-300
The S-300 (also called the SA-10 Grumble) is a series of Russian long range surface-to-air missile
systems produced by NPO Almaz, all based on the initial S-300P version. The S-300 system was
developed to defend against aircraft and cruise missiles for the Soviet Air Defence Forces.
Subsequent variations were developed to intercept ballistic missiles. The S-300 system was first
deployed by the Soviet Union in 1979, designed for the air defense of large industrial and
administrative facilities, military bases, and control of airspace against enemy strike aircraft.
Syria's Chemical Weapons
The CIA believes (yet to be proved) that Syria has had a chemical weapons programme "for years
and already has a stockpile of Chemical Weapon agents which can be delivered by aircraft, ballistic
missile, and artillery rockets".

Syria is believed to possess mustard gas and sarin, a highly toxic nerve agent

The CIA also believes that Syria has attempted to develop more toxic and more persistent
nerve agents, such as VX gas

Syria has not signed the Chemical Weapons Convention (CWC) or ratified the Biological and
Toxin Weapons Convention (BTWC) India, by the way, has signed both!

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Chemical weapons
Sarin - nerve agent

Mustard gas - blistering agent

Source: Centers For Disease Control And Prevention (CDC), US

Appearance/smell Odourless, tasteless, colourless

Form

Liquid form, vaporises (gas) quickly and


spreads

Absorption

Contact with skin or inhalation or can be


ingested in food or water
Symptoms appear within seconds after
exposure to vapour form and up to 18 hours
after exposure to liquid form
Sarin attacks the nervous system. Inhalation
can cause death within 1 - 10 minutes of
exposure

Speed of impact

Effects

Symptoms

Treatment

Mild exposures can result in eye irritation,


runny nose, blurred vision, drooling, a
cough, chest tightness, diarrhoea, confusion,
drowsiness and nausea. Serious exposure
can kill in minutes without treatment.
Symptoms include respiratory failure, loss of
consciousness and paralysis
Antidotes atropine and physostigmine but
must be administered immediately

Colourless and sometimes


odourless. Claimed to have smell
similar to rotten onions, garlic or
mustard
Liquid at room temperature, but
is more commonly used in its gas
form
Contact with skin or inhalation
No immediate symptoms upon
contact; takes two - 24 hours for
victim to become aware
Mustard gas is a blistering agent,
burning eyes and skin exposed to
it and lungs, mouth and throat if
it is inhaled. It is not normally
lethal, but can cause cancer and
serious disfigurement
Conjunctivitis, skin burns, throat
pain, cough and susceptibility to
infection and pneumonia

There is no treatment or antidote


to treat mustard agent injuries.
The agent must be removed
entirely from the body

The conflict will go on for quite some time now. Assad wont relent for now he will probably go
down fighting. The fear is that Syrian war may engulf other countries too (Lebanon, Turkey, Iraq,
Israel, the EU nations!). The UN, yet again, is failing to put an end to its stand because its Security
Council is itself split in two parts, with Russia & China on one side and Britain, France & the US on
the other.

Quick Questions
Q. Who are Syrias immediate neighbours?
A. Turkey, Lebanon, Jordan, Iraq, and Palestine
Q. What has India been doing to resolve the Syrian crisis?

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A. Abstaining Of late India is taking the line that no other country has any right to
interfere in sovereign matters of another. Though it does not vote against any resolution to
bring a transition (in favour of the rebel fighters) by abstaining it is finally taking sides. Very
recently (16th May, 2013), India abstained from voting on the Arab-backed, US supported
resolution on Syria in the UN General Assembly, which called for a political transition.
Whether a group, any group, is the legitimate representative of the Syrian people or not can
only be determined by the Syrian people, not the UN assembly India communicated to the
UN body. This was the fifth resolution by the UN General Assembly since 2011 after the
fighting broke between the ruling Assad regime and the opposition forces.

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Current Affairs

India, Japan & the Bullet Train


India is set to benefit from the Japanese bullet train technology, with Tokyo pledging to invest
heavily in building high speed railway systems in the country. The two sides signed the Exchange of
Notes for loan totalling 424 billion dollars. This includes 71 billion US dollars for the Mumbai Metro
Line-lll project as well as loan of 353 billion dollars for eight other projects. This is symbolic of the
fast tracking of Indo-Japanese relations in the past few months. Prime Minister Manmohan Singh is
currently on a four day Official Working Visit to Japan for the Annual Summit of the Prime Ministers
at the invitation of the new Prime Minister of Japan, Shinzo Abe. 2012 marked the 60th anniversary
of the establishment of diplomatic relations between the two countries which are the two largest
democracies of Asia. The cooperation is most visible in the defence collaborations, which makes
China uncomfortable. Even the US wants India and Japan to work together, because it would act as a
counter-balancing force against China. Today we look at Indias relations with Japan, and the Bullet
Train.
Indo-Japanese Relations the new Phase
Before getting into the current phase, we look at the ancient link.
Swami Vivekananda was impressed by the Japanese when he travelled to the country on his way to
the Parliament of World Religions at Chicago. He called the Japanese "one of the cleanest people on
earth", and was impressed not only by neatness of their streets and dwellings but also by their
movements, attitudes and gestures, all of which he found to be "picturesque".
He would often urge Indians to travel to Japan and learn from the Japanese. Before going into the
formal aspects of this topic, we quote him below what powerful exhorting words from the master!
"Only I want that many of our young men must visit Japan and China every year. Especially,
Japanese, consider India still the dreamland of everything pure and good. And you, what are
you..? Boasting twaddle all your lives, vain talkers, what are you? Come, see these people, and
then go and hide your faces in shame. A race of dotards, you lose your caste if you come out!
Sitting down these centuries with an ever-increasing load of crystallized superstition on your
heads, for hundreds of years spending all your energy upon discussing the touchability or
untouchability of this food or that, with all humanity crushed out of you by the continuous social
tyranny of ages what are you? And what are you doing now..? Walkway the sea-shores with
books in your hands repeating undigested stray bits of European brainwork, and the whole soul

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Current Affairs

bent upon getting a thirty rupee clerkship, or at best becoming a lawyer the height of young
India's ambition and every student with a whole brood of hungry children cackling at his heels
and asking for bread! Is there not water enough in the sea to drown you, books, gowns, university
diplomas, and all?"

Wonder if he would pose the same question to us even now. TestCracker thinks we Indians
are still underplaying ourselves. The performance is still far behind the potential. So, tell us,
what are you?!

Japan now has a new Prime Minister Shinzo Abe. He seems to be doing an economic trun-around
in his country. His economic policies, aggressive and ambitious as they are, are collectively called
abenomics!

Abenomics is meant to resolve Japan's macroeconomic problems. It consists of monetary


policy, fiscal policy, and economic growth strategies to encourage private investment. The
detailed policies includes inflation targeting at a 2% annual rate, correction of the excessive
yen appreciation, setting negative interest rates, radical quantitative easing, expansion of
public investment, buying operations of construction bonds by Bank of Japan (BOJ), and
revision of the Bank of Japan Act.

Japan has been historically suffering from low (often negative) inflation. Abe is now hoping
for reflation.
o

Reflation is a fiscal or monetary policy, designed to expand a country's output and


curb the effects of deflation. Reflation policies can include reducing taxes, changing
the money supply and lowering interest rates.

Abe is known to be staunchly pro-Indian. Not only did he describe strengthening bilateral ties as
extremely important to Japans interests in his 2006 book Utsukushii Kuni E (Towards a Beautiful
Country), but one of his major foreign policy initiatives during his previous tenure as PM was
establishing a new vision for bilateral ties with India. To that end, he advocated emphasizing India
and Japans shared values and overlapping security interests. He has also argued that both countries
have a responsibility to work together in the Indo-Pacific region, which he refers to as broader
Asia. In the Liberal Democratic Partys (LDP) recent campaign pledge, India was listed as a country
with which Japan should enhance cooperation with on issues of national security and energy. With
such support, it can be expected that Abe will look to India as a partner for greater Japanese activism
in the region.

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Economically, relations have never been better. Over the past five years, bilateral trade has
doubled. Things moved forward rapidly after the Comprehensive Economic Partnership Agreement
(CEPA) went into effect in August 2011, removing duties on 94% of products over the next ten years
and ensuring greater movement of goods, services, capital, and people between the two countries.
Japan offers India a wealthy, sophisticated market for Delhis textiles, seafood, IT, pharmaceuticals
and services. Japan, on the other hand, looks to India as an export market for its auto components,
high-end technology, and capital goods.
A note on CEPA with Japan - On August 1, 2011, the Comprehensive Economic Partnership
Agreement (CEPA) between Japan and India became operational; nearly seven years after the
negotiations began in 2004. The India-Japan CEPA is the third such agreement that has been
concluded (similar agreements were signed with Singapore in 2005 and with South Korea in 2009),
which covers not only the goods and services trade but also includes areas like investment,
competition policy, intellectual property rights and government procurement. However, this
agreement assumes more significance since it has two firsts for India: one, it is the first time that
India has concluded a bilateral agreement with an industrialised country; and two, it is also the
first truly comprehensive agreement concluded by India, given the wide range of issues it covers.
Abe, previously in office during 2006-07, has long endorsed relations with India, once describing
them as the most important bilateral relationship in the world. Prior to his second election
victory, in a Project Syndicate article, Abe identified India as a resident power in East Asia on
whom Japan should give greater emphasis.

Prime Minister Manmohan Singh has continuously supported ties since 1991, when Tokyos
pledge of $300 million helped India avert fiscal calamity. Speaking in 2008, Singh explained,
I consider our bilateral relations with Japan to be one of the most important we have.

Japanese products, including Maruti-Suzuki and Toyota automobiles, white goods and
Overseas Development Assistance (ODA) contributions such as the Delhi-Mumbai Industrial
Corridor (DMIC) are appreciated, as is the Delhi Metro system.

Additionally, Japanese companies have been investing in Indian IT and other technology projects,
and the Japanese government has been sending India significant amounts of Official Development
Assistance (ODA). In fact, India was the first country Japan ever extended an ODA loan to back in
1958; and since FY 2003-2004 India has been the single largest recipient of Japanese ODA. Japan
also exempted India from the cuts it made in ODA following the March 2011 disasters.

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Japan and India work together diplomatically to promote common interests. At the UN, they actively
champion reforming the Security Council Japan and India are members of G4, which has Brazil and
Germany as the other two members. Additionally, they cooperate in promoting the G-20 and East
Asia Summit as the primary venues for international economic cooperation and regional
multilateralism, respectively. Within these institutions, Tokyo and Delhi cooperate on a number of
issues including nuclear disarmament and non-proliferation, counterterrorism, and climate change
and energy security.
Japan and Indias security cooperation over the last six years has been greater than in the previous
sixty years combined. This cooperation includes: building naval capacity through port calls, naval
and coast guard exchanges, joint naval and coast guard exercises, and greater cooperation in
information sharing and technical assistance; the protection of sea lines of communication (SLOCs)
and anti-piracy efforts in the Gulf of Aden; and extending patrol boats and capacity building
training to the littoral states in the Strait of Malacca. Along with their strategic dialogue, the two
sides have launched a bilateral Shipping Policy Forum, a Maritime Security Dialogue, and a
Cybersecurity Dialogue.

The first bilateral maritime exercise between India and Japan 'JIMEX 12' (Japan India
Maritime Exercise) was held in June 2012, off the coast of Tokyo.

The government has been deploying ships of the Indian Navy on Eastbound long range
deployments in keeping with India's 'Look East' policy, and to strengthen military ties with
the countries of this strategically important region.

Gradually, strategists on both sides are appreciating the necessity of deeper engagement,
particularly regarding maritime security and nuclear technology trade. For example, whereas in
2008, India resisted inviting Japan to join Malabar maritime exercises following Chinas vocal at
the creation of an Asian NATO, in 2012 Japan and India staged their first bilateral initiative.

Exercise Malabar is a multilateral naval exercise involving the United States, India, Japan,
Australia, and Singapore. The annual MALABAR series began in 1992, and includes diverse
activities, ranging from fighter combat operations from aircraft carriers, through Maritime
Interdiction Operations Exercises.

Similarly, in stark contrast to Japans condemnation of Indias position on nuclear technology


following tests in 1998, in June 2010, Japan announced talks to conclude a civil-nuclear trade
agreement. Considering Indias refusal to sign the Non-Proliferation Treaty, this move was a

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remarkable step for Japanese policymakers who have long been one of the treatys staunchest
defenders. Despite some unease by Delhi, the launch in December 2011 of a US-Japan-India trilateral
dialogue also suggested a realisation of the importance of exchanging views at the top level of
government. Despite the objections of China to this grouping, the annual meeting is set to continue.
While this is a strong record of cooperation, there are still many areas for further enhancement.
Economically, the CEPA means greater economic connectivity, which is especially beneficial given
the complimentary nature of their economies. For instance, continued Japanese growth will require
more workers and greater engagement with growing markets. India can therefore play a vital role
with its booming economy, lower production costs, and an expanding middle class that is creating
greater demand for high-end products. Indias growth, on the other hand, requires investments in
21st century infrastructure and technological expertise, both of which Tokyo can help provide. For
example, India intends to spend $1 trillion on infrastructure projects over the next five years, and
hopes to finance 40 percent of this with private capital. Similarly, India will require Japans
technology and investment to help close technological gaps and an infrastructure deficit.

The ambitious Delhi Mumbai Industrial Corridor is being (partially) funded by Japan

Diplomatically, both countries want international institutions to reflect todays multi-polarity. They
also advocate nuclear disarmament and non-proliferation, and hope to prevent the proliferation of
Weapons of Mass Destructions and the means to deliver them. Similarly, Tokyo and Delhi share a
strong and growing interest in preserving freedom of navigation in the maritime commons, which
both are heavily reliant on for their energy imports and trade. They also share an enduring interest
in preventing any country from establishing hegemony over the Indo-Pacific region, with China a
growing concern for both countries.
Although there are plenty of reasons for optimism, there are still a number of barriers to advancing
Indo-Japanese ties. For example, despite the rapid growth of economic ties in recent years, Japanese
investors are not completely sold on Indias business climate. Not only do they find it difficult to
work through the complex Indian bureaucracy, but they are also concerned about Indias poor
infrastructure, opaque legal and taxation systems, and official corruption. Similarly, civilian nuclear
cooperation remains stalled due to Indias refusal to join the Nuclear Non-Proliferation Treaty (NPT)
as a non-nuclear weapon state. This is where Abes victory becomes important. Having a pro-India
premier in Japan may convince investors who are wary of doing business in India. Likewise, Abes
LDP victory came at the expense of the anti-nuclear parties, and Abe can be expected to push for a

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civilian nuclear agreement with India, much as countries like the U.S., Russia, Canada, and South
Korea have done, and others like Australia are now in the process of doing.
Both countries share concerns over Chinas maritime behaviour and freedom of navigation. While
both have powerful navies, neither is strong enough alone to secure the maritime commons and
thus has an interest in reliable partners. Indias navy and coast guard cannot monitor all the Sea
Lines of Communication (SLOC) traffic that transits the Strait of Malacca through to the Persian Gulf,
so it requires interstate cooperation to handle challenges in waters near India as well as SLOCs
farther away. While Japans navy does not operate in Indian waters (its legally able to defend up to
1,000 nautical miles from Japan), under special legislation it participates in limited anti-piracy
operations in the Gulf of Aden. They benefit from each others surveillance, and have begun holding
joint naval exercises. Greater cooperation in these efforts do not face any great constraints, which is
important given that cooperation will help them hedge against unpredictable futures.
Because of his enthusiasm for stronger relations with Japan in India, Abes win provides a unique
opportunity for the two great powers to expand their cooperation. With few obstacles standing in
the way, we soon could be witnessing a flourishing of Indo-Japan bilateral ties.
Enter the Bullet Train
The Indian Prime Minister appreciated Japan's high level expertise in designing and implementing
Bullet Train systems. He conveyed that India will plan such projects based on its infrastructure
priorities, commercial viability and financial resources in India. The Mumbai-Ahmedabad rail line
would stretch 500 kilometres at an estimated cost of upto one trillion yen. The two Prime
Ministers, recognising the importance of upgrading the speed of passenger trains on the existing
Delhi-Mumbai route to 160-200 kmph welcomed the final feasibility report undertaken with Japan's
cooperation, and confirmed that further consultation between the two countries will continue to
draw up a road-map.

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The Shinkansen, also known as the "Bullet Train", is a network of high-speed railway lines in Japan
operated by four Japan Railways Group companies. The maximum operating speed is 320 km/h (200
mph). Many countries are now using powerful electromagnets to develop high-speed trains, called
maglev trains (Bullet train too uses it).

Maglev is short for magnetic levitation, which means that these trains will float over a
guideway using the basic principles of magnets to replace the old steel wheel and track
trains.

The big difference between a maglev train and a conventional train is that maglev trains do
not have an engine -- at least not the kind of engine used to pull typical train cars along steel
tracks. Instead of using fossil fuels, the magnetic field created by the electrified coils in the
guideway walls and the track combine to propel the train.

China too has its super-speed maglev trains but Chinese trains have already met a couple of
accidents calling into question the quality levels of those trains.
Hopefully, India will not rush into implementing the high speed tracks but only make it available to
the public after undertaking all the tests for reliability and robustness.

Quick Questions
Q. With so many countries making maglev trains, whose is the fastest?

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A. China has the fastest train and China has the longest high speed train network.
Q. You mentioned DMIC above what is it?
A. Delhi - Mumbai Industrial Corridor (DMIC) is India's most ambitious Infrastructure
programme aiming to develop new industrial cities as "Smart Cities" and converging next
generation technologies across infrastructure sectors. The objective is to expand India's
manufacturing and services base and develop DMIC as a "Global Manufacturing and Trading
Hub". The programme will provide a major impetus to planned urbanization in India with
manufacturing as the key driver. In addition to new Industrial Cities, the programme
envisages development of infrastructure linkages like pioneer plants, assured water supply,
high capacity transportation and logistics facilities as well as softer interventions like skill
development programme for employment of the local populace. In the first phase seven
new industrial cities are being developed. The programme has been conceptualized in
partnership and collaboration with Government of Japan.

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Killing the Killer Robots


The U.N. is debating whether to halt the fast-growing business of machines that can shoot without
human interventionbefore it's too late. The UN calls them Lethal Autonomous Robots (LAR) the
media calls them Killer Robots in either case, they are lethal and they can kill. We had discussed
The Deadly Drones in a recent session. The Killer Robots are more dangerous than them because
they dont require any human intervention at all. Welcome to the future of war where the
Terminator movies dont fall into the genre of science fiction, but under realistic cinema! The UN
says such robots may lower the threshold for the states to go to war without meeting the
international human rights standards. Who will be held responsible in case the robots go rogue and
kill a large number of people? The UN says only people deserve to kill people! This is a very
interesting and developing issue which we look into today. This is the future of warfare. Previously
we had discussed how the flu virus may destroy the world and the power & mystery of tornadoes this may very well be one of the most plausible ways by which the humankind will eliminate itself.
Enter the Killer Robots
For societies with access to it, modern technology allows increasing distance to be put between
weapons users and the lethal force they project. For example, drones enable those who control
lethal force not to be physically present when it is deployed, but rather to activate it while sitting
behind computers in faraway places, and stay out of the line of fire. They still need to be activated.
Lethal autonomous robotics (LARs), if added to the arsenals of States, would add a new dimension to
this distancing, in that targeting decisions could be taken by the robots themselves. In addition to
being physically removed from the kinetic action, humans would also become more detached from
decisions to kill and their execution.
Many countries are now developing armed robots that can kill without the need for human choice or
intervention. The possible introduction of LARs (lethal autonomous robots) raises far-reaching
concerns about the protection of life during war and peace - In the future, machines and not humans
will take the decision on who is alive or dies. In short, the weapon will become the warrior.

As per the most widely used definition (endorsed inter alia by both the United States
Department of Defense and Human Rights Watch), the term LARs refers to robotic weapon
systems that, once activated, can select and engage targets without further intervention by
a human operator.

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The important element is that the robot has an autonomous choice regarding selection of
a target and the use of lethal force.

The bottom line is that the Killer Robots are human-out-of-the-loop systems even the
current drones keep the humans in the loop that is, they are activated by the humans
before destroying their targets.

Fully autonomous weapons, which are the focus of the UN report, do not yet exist, but technology
is moving in the direction of their development and precursors are already in use. Many countries
employ weapons defence systems that are programmed to respond automatically to threats from
incoming munitions for example, the Aegis and Patriot surface-to-air missile defence systems,
already have an "autonomous mode" that acts when a split-second response is needed.
Other precursors to fully autonomous weapons either deployed or in development, have antipersonnel functions and are in some cases designed to be mobile and offensive weapons.

Militaries value these weapons because they require less manpower, reduce the risks to
their own soldiers, and can expedite response time.

In contrast to other revolutions in military affairs, where serious reflection mostly began
after the emergence of new methods of warfare, there is now an opportunity collectively to
pause, and to engage with the risks posed by [lethal autonomous robotics] in a proactive
way. The advent of LARs requires all involved States, international organizations, and
international and national civil societies to consider the full implications of embarking on
this

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Current Technology
While much of their development is shrouded in secrecy (most of the development is being done
under-cover, it is speculated), robots with full lethal autonomy have not yet been deployed.
However, robotic systems with various degrees of autonomy and lethality are currently in use,
including the following:
I.

The US Phalanx system for Aegis-class cruisers automatically detects, tracks and engages
anti-air warfare threats such as anti-ship missiles and aircraft.

II.

The US Counter Rocket, Artillery and Mortar (C-RAM) system can automatically destroy
incoming artillery, rockets and mortar rounds.

III.

Israels Harpy is a Fire-and-Forget autonomous weapon system designed to detect, attack


and destroy radar emitters. (In our session on Drones (click here) we noticed that India too
has Harpy weapon systems from Israel and India is not happy about Harpy because it cannot
be reused!)

IV.

The United Kingdom Taranis jet-propelled combat drone prototype can autonomously
search, identify and locate enemies but can only engage with a target when authorized by
mission command. It can also defend itself against enemy aircraft.

V.

The Northrop Grumman X-47B is a fighter-size drone prototype commissioned by the US


Navy to demonstrate autonomous launch and landing capability on aircraft carriers and
navigate autonomously.

VI.

The Samsung Techwin surveillance and security guard robots, deployed in the demilitarized
zone between North and South Korea, detect targets through infrared sensors. They are
currently operated by humans but have an automatic mode

VII.

In South Korea, the SGR-1 sentry robot targets people who enter the demilitarized zone and
shoots them if a soldier back at base gives the command.

In support of the LARs


The Killer Robots will have one advantage they will not take actions based on temporary spikes in
emotion. They could even make armed conflict more humane and save lives on all sides. Future
generations of robots could be able to employ less lethal force, causing fewer unnecessary deaths,
with their greater ability to immobilise or disarm a target.

LARs will not be susceptible to some of the human shortcomings that may undermine the
protection of life - typically they would not act out of revenge, panic, anger, spite, prejudice
or fear.

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Robots also do not rape. So, at least war crimes of this nature wont happen in the future!

Another advantage is obvious in a dangerous conflict with the terrorist, there would be no need to
put human lives at risk.
On the flip side, because they lack the ability to act "out of compassion or grace" and understand the
bigger picture, a robot would never decide that some specific situations required greater leniency,
even in wartime. And then, even the terrorists may acquire killer robots. Their robots will fight the
military robots and the world will watch
This is a fascinating debate and it will only grow in the coming days (with the UN discussion coming
up shortly). The doomsday scenario projected in the Terminator series of movies seems to so real
when you enter this debate. Let us hope the machines dont take over the men.

Quick Questions
Q. What is this Terminator movie you have mentioned above I have never seen it?
A. Ok first things first watch it The Terminator is a 1984 American science fiction action
film directed by James Cameron, co-written by Cameron, Gale Anne Hurd, and William
Wisher Jr. and starring Arnold Schwarzenegger, Michael Biehn, and Linda Hamilton.
Schwarzenegger plays the Terminator, a cyborg assassin sent back in time from the year
2029 to 1984 to kill Sarah Connor, played by Hamilton. The plot revolves around the premise
that in the near future an artificial intelligence defence network called Skynet will become
self-aware and initiate a nuclear holocaust of mankind.
Though not expected to be either a commercial or critical success, The Terminator topped
the American box office for two weeks and helped launch the film career of Cameron and
solidify that of Schwarzenegger. Three sequels have been produced: Terminator 2:
Judgment Day (1991), Terminator 3: Rise of the Machines (2003), and Terminator Salvation
(2009), as well as a television series, Terminator: The Sarah Connor Chronicles (20082009)
Q. I am fascinated by this topic where do I read more about it?
A. Well, start with the report which we have been talking about above - "Lethal
autonomous robotics and the protection of life" by the UN. Stay fascinated

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India grew at 5%
Remember our discussion on the GDP growth rate of India? The official figures for the last quarter of
the last financial year (Fiscal Year 2012-13 or FY13) are out, along with the consolidated numbers for
the entire year. The growth rate in the fourth quarter ending on March 31, 2013 stood at 4.8 per
cent showing a marginal improvement over 4.7 per cent recorded in the third quarter of 2012-13.
India's manufacturing sector grew at 2.6% during the latest quarter while farm output rose by just
1.4%. For the entire year, the GDP growth rate was 5% - in FY13 India's economy grew at its slowest
pace in a decade! The BSE sensex slipped by 485 points during the intra-day trade. India was
recording annual growth of 9% until two years ago, but in recent months it has seen a sharp decline
blamed on a slowdown in its manufacturing and services sectors. So, what happens to Indias
growth story with such a low growth rate? We look at the future of Indian Economy in the context
of the current trend in growth but we start with the basics on GDP! TestCracker thinks that GDP
would rank right at the top of the list of the words which are frequently used but are rarely
understood This is an indispensable session for you to not just understand the GDP as a concept
but also appreciate the challenges in front of India relating to its growth.
What is GDP?
Well, it is a measure of National Income Accounting, which is the bookkeeping system that a national
government uses to measure the level of the country's economic activity in a given time period
(usually a quarter and/or a year). It records the level of activity in accounts such as total revenues
earned by domestic corporations, wages paid to foreign and domestic workers, and the amount
spent on sales and income taxes by corporations and individuals residing in the country. NIA is
usually of two types GDP and GNP.

Gross Domestic Product (GDP) Monetary value of all final goods and services produced in
the domestic territory of a country during an accounting year.

Gross National Product (GNP) It is the monetary value of final goods and services by the
citizens of a country within an accounting year.
o

Clearly, GDP is about the transactions within the boundaries of a country while GNP
is about the transactions done by the citizens of the country.

More on GDP (our focus of discussion today!):

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Important - When we say within the domestic territory, you must know that it is not just the
territorial boundary you see on the maps!
o

Domestic Territory = Countrys political boundary + Embassies/Consulates +


Military Establishments of the country abroad + Ships/Aircrafts/Fishing Vessels/Oil
Rigs belonging to the residents of the country

GDP is a number that expresses the worth of the output of a country in local currency.

Intermediate goods and services are not included to avoid double counting
o

Same good can be final (milk which is consumed ) or intermediate (milk which is
used to produce sweets) depending on the usage

Capital goods (e.g. machinery) are included in GDP, but intermediate goods (e.g. raw
materials) are not

In India, Services Sector contributes 58% to the GDP the biggest contributor.

Accounting Year = Fiscal Year; for India it is 1st of April to 31st of March (of the next year)

GDP includes the income generated by MNCs in India because the transactions are done
within the boundaries of India.

Real GDP vs. Nominal GDP


In order to deal with the ambiguity inherent in the growth rate of GDP, macroeconomists have
created two different types of GDP, nominal GDP and real GDP.
I.

Nominal GDP is the sum value of all produced goods and services at current prices. Nominal
GDP is more useful than real GDP when comparing sheer output, rather than the value of
output, over time.

II.

Real GDP is the sum value of all produced goods and services at constant prices.

The prices used in the computation of real GDP are taken from a specified base year. By keeping the
prices constant in the computation of real GDP, it is possible to compare the economic growth from
one year to the next in terms of production of goods and services rather than the market value of
these goods and services. In this way, real GDP frees year-to-year comparisons of output from the
effects of changes in the price level.
Clearly, when we are discussing the GDP growth rate figures, we are talking about the Real GDP.
The significance of the base year in GDP
In order to compare the GDP of one period with another, we need a year which is used as a base to
pick the prices from. Clearly, the year has to be a normal one it doesnt have to be an

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exceptionally bad or good year. India currently is using 2004-05 as the base year (earlier it was
1999).

Criteria for selection of base year


i

Normal year neither too high nor too low

ii

Latest possible year

iii Relevant data for that year should be readily available

Current Development - Disturbed by questions on the credibility of its data, the government
has initiated revision of base year for calculating the gross domestic product (GDP). The
exercise will not only bring the GDP base year to 2011-12 from 2004-05 but could also see a
rise in growth rates as it would factor in data from excluded sectors.
o

The exercise will take about three to four years to be completed - according to the
country's chief statistician TCA Anant

Who collects the GDP data in India?

Two data collection agencies in India

Central Statistical Organisation (CSO) Estimates National Income

National Sample Survey Organisation (NSSO) Collects data on employment,


poverty, consumption, expenditure, etc
o

Sample Surveys conducted annually, but Large Sample Surveys conducted


every 5 years

Latest Large Sample Survey was that of the 66th Round of NSSO (2009-10)
but it wasnt selected as a base year, because it wasnt a normal year
(economy affected by financial crisis)
The Finance Ministry had commented, "It (2009-10) was an
abnormal year with the global slowdown hitting urban areas and the
drought affecting rural India, so all the results have gone haywire."
So, the last Large Sample Survey (61st Round, 2004-05) was used for
selecting the base year

CSO & NSSO fall under the Ministry of Statistics and Programme Implementation.

Back to the Current Problem


Economy had grown at 4 per cent in 2002-03. After that began the upsurge the so called growth
story. It peaked in the year before the Global Financial Crisis of 2008. India's economic growth was
at 6.2 per cent for the 2011-12 fiscal. The growth rate of 5% for 2012-13 is the lowest in a decade.

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Between 2004 and 2008, and again in 2009-10 and 2010-11 the growth rate was over 8 per
cent and crossed 9 per cent in four of those six years (but never touched 10%).

11th Plan period had average growth rate of 8 percent, highest during any Plan period

The numbers present a sad story. The GDP splits for the last quarter are as follows:
Manufacturing sector growth at 2.6% Vs 0.1% (YoY)
Farm sector growth at 1.4% Vs 2% (YoY)
Mining sector growth at -3.1% Vs 5.2% (YoY)
Construction sector growth at 4.4% Vs 5.1% (YoY)
Community, social & personal services growth at 4% (YoY)
Trade, hotels, transport & communication at 6.2% Vs 5.1% (YoY)
Finance, insurance, realty & biz services at 9.1% (YoY)
Services growth at 6.6% Vs 7.3% (YoY)
Industry growth at 2.7% Vs 2.1% (YoY)
[YoY means year on year comparison. For example, manufacturing sector grew at 2.6% in Jan-March
2013 compared to Jan-March 2012 while it grew at 0.1% in Jan-March 2012 compared to Jan-March
2011]
There is evidence the economy has bottomed out or so the government keeps insisting. But we
still don't have evidence of a strong recovery. It is challenging to get to 6 per cent (growth) where
last quarter is 4.8 per cent. According to the finance ministry, the growth in the current fiscal (FY14)
is likely to improve to 6.1-6.7 per cent.

Getting back to potential growth rate of 8 percent is the challenge facing the country and this was
acknowledged by the Finance Minister in his budget speech this year. He insisted that the slowdown

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in Indian economy has to be seen in the context of slowing global economic growth from 3.9 per
cent in 2011 to 3.2 per cent in 2012. However, he insisted, there was no reason for gloom or doom.

Of the large countries of the world only China and Indonesia growing faster than India in
2012-13.

In 2013-14, only China is projected to grow faster than India. By the way, the growth rate of
China has also come down it is no longer in double digits!

The Finance Minister continues to be bullish on Indias growth story. He believes that the economy
has green shoots of recovery.

"Going forward, China and India will continue to be drivers of world growth, with China
growing at 8-8.5 percent and India at 6.1-6.7 percent between 2013 and 2014. ASEAN-4
(Indonesia, Malaysia, Philippines and Thailand) is also projected to grow at more than 5.5
percent. China is reported to have already overtaken the United States in economic size
(measured by real per capita GDP in purchasing power parity terms) by 2012-13,"
Chidambaram recently told to Harvard alumni.

In defence of the growth story


o

India's share of the working age population will continue to rise. Nearly one-half the
additions to the Indian labour force over the period 2011-30 will be in the age group
30-49, even while the share of this group in advanced countries will decline.
This means greater production, savings and investment in India as the
demographic dividend is reaped

The government of the day has woken up to the reforms and understands that its
political future is also linked with the economic growth of the country.

The only problem is that 2014 is an election year and governments start focusing on
winning the elections more than running the county in the year leading to the
election year

TestCracker will also conclude that there is no reason for doom or gloom. Our GDP growth rate has
been on a downhill but we are now looking upwards. If nothing goes seriously wrong with the world
economy India has no reason to worry too much.

Quick Questions
Q. Which is the fastest growing economy of Asia?

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A. Na nanot China now. The Philippines (yes, the country is called The Philippines not
Philippines!) grew 7.8 percent, helped by robust domestic spending, making the Philippines
the fastest growing economy in Asia as it pushed past China's 7.7 percent annual rate to
second place. Very close fight, we must say.
Q. What is the relation between GDP & GNP?
A. Good question. Pay attention here
GNP = GDP + NFIA (net factor income from abroad).
Net factor income from abroad is the difference between the income received
from abroad for rendering services and the income paid for the services rendered
by non-residents in the domestic territory of a country. GNP is, thus, the sum of
GDP and net factor incomes from abroad.
This is obvious from the definition of GNP it is about the income by the citizens
so you subtract what is earned by foreigners in India and add what is earned by
Indian citizens outside India!
[In case you are preparing for Civil Services, you need to pay special attention to the basics of
economics, which almost dominated this years Paper I. Analysis and the solved question paper is
here. ]

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Murthy returns to Infosys


Dangerous maladies need drastic remedies. Infosys, which recently lost its second position in the
Indian IT industry to Cognizant, has re-appointed its co-founder Narayana Murthy as its Executive
Chairman. In an extra-ordinary move, Infosys has increased the age limit for holding Chairmans post
to 75 years, to facilitate the return of Murthy at the top position. Murthy also brings his son Rohan
(who renamed his surname to Murty instead of Murthy!) along as his Executive Assistant, which
is surprising for he had always maintained that his family will be out of the leadership roles at
Infosys. Grappling with disappointing results and loss of market share for quarters at stretch, this
might be the last attempt by Infosys to regain lost ground. Murthy, poster-boy of Indias IT success,
has replaced chairman K V Kamath, who has moved on to the role of independent director. The
current executive co-chairman, S Gopalakrishnan has also been re-designated as executive vice
chairman, while S D Shibulal will continue as Chief Executive Officer (CEO). What is wrong with
Infosys? Is India still the driving force behind Information Technology? Can Murthy revive the
company which he calls his second child?
About Murthy
He had cleared Indian Institute of Technology (IIT) entrance test for engineering. But due to the
financial problem of his family he could not join IIT. Instead he joined National Institute of
Engineering, then affiliated to University of Mysore and graduated in 1967 with a degree in Electrical
Engineering. Two years later, in 1969 he received his master's degree from Indian Institute of
Technology, Kanpur. Before starting Infosys, Murthy worked with Indian Institute of Management
Ahmedabad as chief systems programmer and Patni Computer Systems,Pune. He started Infosys in
1981 and served as its CEO from 1981 to 2002 and as Chairman from 2002 to 2011. In 2011, he
stepped down from the board and became Chairman Emeritus.

Murthy along with other six software professionals founded Infosys in 1981 with an initial
capital injection of Rs 10,000, which was invested by his wife Sudha Murthy.

He served as the CEO of Infosys for 21 years from 1981 to 2002 and was succeeded by cofounder Nandan Nilekani in 2002.

At Infosys he articulated, designed and implemented the Global Delivery Model for IT
services outsourcing from India.

He held the executive position of Chairman of the Board from 2002 to 2006, when he
became the "non-executive" Chairman of the Board and Chief Mentor.

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In August 2011, he retired completely from the company and taking the title Chairman
Emeritus.

Now, he returns as the Executive Chairman of Infosys.


o

The decision comes a month after Infosys missed its annual guidance for the second
consecutive year (triggering an unprecedented fall in its share price, by 25%), and
registered decline in overall revenue growth.

Its guidance for 2013-14 remained muted; the company attributed this to extreme
volatility.

However, its age-old rival TCS continues to do well therefore analysts


dont buy the argument that Infosys is not doing well because of the market
conditions only.

While Cognizant's revenue was nearly $2 billion less than Infosys in 2008-09,
it has now surpassed it.

TCS's revenues were $1.5 billion more than Infosys five years ago; today, the
gap has widened to $4 billion.

The slide is also said to have raised questions in a section of Infosys's senior
management about CEO S D Shibulal's leadership and the Infy 3.0 strategy
he unveiled with its focus on consulting and higher-end work.
The question is, now that Infy 3.0 has failed, can Murthy 2.0 be as
magical as Murthy 1.0?

Infosys used to set the industry standard for growth and profits but it has been
struggling to keep pace during the past two years.
In 2012-13, when Infosys saw its sales expanding by 5.8% to $7.4
billion (`41,880 crore), the rest of the industry grew nearly twice as
fast.

Shareholders, especially the institutional ones, have been panicking about the falling
performance of the company, and it is quite possible that the move to re-instate
Murthy is a reaction to their pressure ahead of the AGM on June 15.

FIIs hold 40.52 per cent of Infosyss equity forming an influential group.

Will his return matter?


It should. First, it sends a signal to the clients and the industry that the man who created and
nurtured the company is back to see it out of the current crisis. Second, he comes with a firm plan

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which he hasnt revealed yet, but we can make a guess. He is known to be decisive and he can be
entrusted to take quick decisions and do whatever it takes to capture the lost ground.

Murthy has been stressing the importance of winning more technology contracts that focus
on application development as well remote infrastructure management, two areas that
Infosys during the past two years have termed commoditised and low-margin.
o

These are also the areas where rivals have been overtaking Infosys and scoring on
the growth front

Many experts believe that Infosys has many problems, but Murthy is not the universal
answer to them.

For the Corporate Governance point of view, this decision throws out of the window some
of the professed principles around retirement age and family members of founders of
Infosys.
o

Murthy justified the inclusion of his son in the management team by saying, "The
quickest and best way of my being effective is by utilising the competencies of a
small team of people that I have been interacting with in the past 2-3 years and one
of them happens to be Rohan."

Murthy addressed the issue in his letter to the employees, where he said that his
son's "charter is to be my executive assistant and not to aspire to become the next
CEO."

But we have heard such words before. Infy's Bangalore rival Wipro also
maintained such a stance however, after many denials, Rishad Premji
the son of Azim Premji - is rising to the top.

Professionally speaking, Murthy Junior is well qualified. He has degrees in


computer science from Harvard and Cornell universities, and fellowships at
MIT, Caltech and Microsoft.

Both father and son will take a notional salary of Re 1 only from Infosys.

In the past, Murthy has repeatedly said that those over 65 years should only play
advisory, not executive, roles, arguing in favour of young blood and fresh ideas.
He is 66 now and he returns in an executive role for the next 5 years!

The Indian IT industry in general is also facing anti-outsourcing challenges rival countries are
coming up too. This is not the 90s the world is still flat, but there are many more companies to
compete with now. Infosys will have to innovate to exist.

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Whatever happens from now on, this surely will be an interesting case study for the business
schools. Infosys has decided to go into the past to overcome hurdles in the future. Is this strategy
going to work? The new set of leaders will be required to take bold, courageous and sometimes
unpopular steps (firing the unproductive employees) to put the company back on the growth path.
The coming quarters will decide if Murthy 2.0 will be magical. The investors are watching.

Quick Questions
Q. Is Infosys the only company founded by Narayana Murthy?
A. He started a company named Softronics before he founded Infosys. It was an IT service
firm focusing on domestic market. When that company failed after about a year and a half,
he joined Patni Computer Systems in Pune. So from an employee (at IIM Ahmedabad), he
became an entrepreneur and when business failed he became an employee again, only to
become Indias most successful entrepreneur next!
Q. Has he founded any company after Infosys?
A. Well, yes, sort of! After having helped build Infosys as a force to reckon with in the
international arena, he formed Catamaran Ventures a venture capital firm. The money
came from his wife and him selling part of their stake in Infosys to create a corpus of a little
over Rs 600 crore.

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All about Asteroids


An asteroid that measures nearly 2.7km (1.7 miles) across has flown past the Earth. The space rock,
which is called 1998 QE2, is so large that it is orbited by its own moon. In February of this year, one
asteroid 2012 DA14 made a close pass of Earth, missing it by at a distance of 28,000 km less than
that of moon from earth. 1998 QE2 was (thankfully!) about 200 times more distant than the asteroid
2012 DA14 - but it is more than 50,000 times larger. We have spent some time discussing how the
how the virus may end the world, how destructive tornadoes can be, and how the killer robots may
bring doomsday. Today, we examine asteroids and other space rocks. Earth is terribly
underprepared to identify and destroy or at least deflect these rocks few of which are so huge,
they will burn the earth upon collision. NASA is struggling to come up with ways to change the
trajectories of these huge rocks. We will also look at the technical definitions of asteroid, meteor,
meteorite and comet. The plans of NASA to deal with earth colliders sound like science fiction! A
very fascinating session read on
The Near Earth Objects
Near-Earth Objects (NEOs) are comets and asteroids that have been jolted by the gravitational
attraction of nearby planets into orbits that allow them to enter the Earth's neighborhood.
Composed mostly of water ice with embedded dust particles, comets originally formed in the cold
outer planetary system while most of the rocky asteroids formed in the warmer inner solar system
between the orbits of Mars and Jupiter.

The scientific interest in comets and asteroids is due largely to their status as the relatively
unchanged remnant debris from the solar system formation process some 4.6 billion years
ago.

The giant outer planets (Jupiter, Saturn, Uranus, and Neptune) formed from an
agglomeration of billions of comets and the left over bits and pieces from this formation
process are the comets we see today.

Likewise, today's asteroids are the bits and pieces left over from the initial agglomeration of
the inner planets that include Mercury, Venus, Earth, and Mars.

Therefore, put together, the studies of comets and asteroids can tell us much about the
origins of the solar system.
o

As the primitive, leftover building blocks of the solar system formation process,
comets and asteroids offer clues to the chemical mixture from which the planets

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formed some 4.6 billion years ago. If we wish to know the composition of the
primordial mixture from which the planets formed, then we must determine the
chemical constituents of the leftover debris from this formation process - the
comets and asteroids.
Potentially Hazardous Asteroids
PHAs are currently defined based on parameters that measure the asteroid's potential to make
threatening close approaches to the Earth. Specifically, all asteroids with an Earth Minimum Orbit
Intersection Distance (MOID) of 0.05 AU or less and an absolute magnitude (H) of 22.0 or less are
considered PHAs. In other words, asteroids that can't get any closer to the Earth (i.e. MOID) than
0.05 AU (roughly 7,480,000 km or 4,650,000 mi) or are smaller than about 150 m (500 ft) in diameter
(i.e. H = 22.0 with assumed albedo of 13%) are not considered PHAs.

There are currently 1397 known PHAs.

Astronomical Unit (AU) - A unit of length defined as 149,597,870 km or 15 Lakh Km


approximately, which is roughly the mean EarthSun distance.

An asteroid's absolute magnitude is the visual magnitude an observer would record if the
asteroid were placed 1 Astronomical Unit (AU) away, and 1 AU from the Sun and at a zero
phase angle.

Albedo - The ratio of the light reflected by a body to the light received by it. Albedo values
range from 0 (pitch black) to 1 (perfect reflector).

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The minimum orbital intersection distance (MOID) is the minimum distance between the
approaching orbits of two objects. It indicates the closest possible approach of the two
objects except where excluded by protective resonance.
o

As such, the MOID can act as an early warning indicator for collision between an
asteroid and a planet. A large MOID between and asteroid and the Earth indicates
the asteroid will not collide with Earth in the near term. Asteroids with a small
MOID to Earth should be carefully followed because they can become Earth
colliders.

This ``potential'' to make close Earth approaches does not mean a PHA will impact the Earth. It only
means there is a possibility for such a threat. By monitoring these PHAs and updating their orbits as
new observations become available, we can better predict the close-approach statistics and thus
their Earth-impact threat.
Difference between Asteroids, Meteoroids, Meteors, Meteorites & Comets
TestCracker has spent some time to clearly demystify the definitions of these objects. Pay
attention here

Asteroids are small bodies that orbit the Sun as the Earth does. They have no atmospheres,
but do exert gravitational pull, sometimes orbiting one another.
Larger asteroids are called planetoids or minor planets, smaller ones often called meteoroids
Once any of these enters our planet's atmosphere, it becomes a meteor. Meteors are
asteroids, comet fragments or other space objects that enter Earth's atmosphere or burn up.
Many meteors break into pieces or burn up entirely as they speed through the atmosphere
Once meteors or fragments actually impact the surface, they become meteorites. Therefore
meteorites are meteors that make it all the way to earth's surface.
A comet is an icy Small Solar System body (SSSB) that, when close enough to the Sun,
displays a visible coma (a thin, fuzzy, temporary atmosphere) and sometimes (not always!)
also a tail. These phenomena are both due to the effects of solar radiation and the solar
wind upon the nucleus of the comet. Comets are distinguished from asteroids by the
presence of a coma or a tail.

More on Asteroids
There are millions of asteroids orbiting the sun, some 750,000 of which are found in the asteroid
belt, a vast ring of asteroids located between the orbits of Mars and Jupiter. Asteroids can be as
large as hundreds of kilometers wide: The asteroid Ceres, sometimes referred to as a dwarf planet, is
940 km wide. Asteroids have no atmosphere, but many are large enough to exert a gravitational pull
some, in fact, have one or two companion moons (like the 1998 QE2, which we are discussing
today!), or they form binary systems, in which two similarly sized asteroids orbit each other.
Scientists are eager to study asteroids because they reveal so much information about the early
formation of our solar system some 4.6 billion years ago.

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2012 DA 14 - It is a near-Earth asteroid with an estimated diameter of 50 meters (160 ft) and
an estimated mass of 190,000 metric tons. It was discovered on February 23, 2012. The
asteroid passed 27,700 km (17,200 mi) from the surface of Earth. This is a record close
approach for a known object of this size. Too close for comfort!
The Palermo Technical Impact Hazard Scale (commonly referred to as Palermo Scale) is a
logarithmic scale used by astronomers to rate the potential hazard of impact of a near-earth
object (NEO). It combines two types of dataprobability of impact, and estimated kinetic
yieldinto a single "hazard" value.
The Torino Scale is another method for categorizing the impact hazard associated with nearEarth objects (NEOs) such as asteroids and comets. It is intended as a communication tool
for astronomers and the public to assess the seriousness of collision predictions, by
combining probability statistics and known kinetic damage potentials into a single threat
value. It is much simpler than Palermo Scale. It uses an integer scale from 0 to 10 (Palermo is
logarithmic).
o On 24 December 2004, minor planet 99942 Apophis (at the time known by its
provisional designation 2004 MN4) was assigned a 4 on the Torino scale, the
highest rating ever achieved. There was a 2.7% chance of Earth impact on 13
April 2029. However, on 28 December 2004, the risk of impact dropped to zero
for 2029, but future potential impact solutions were still rated 1 on the Torino
scale. We are safefor now.
Naming the Asteroids
A newly discovered asteroid is given a provisional designation (such as 2012 DA14) consisting of
the year of discovery and an alphanumeric code indicating the half-month of discovery and the
sequence within that half-month. Once an asteroid's orbit has been confirmed, it is given a
number, and later may also be given a name (e.g. Ceres). The first few asteroids were named after
figures from Greek and Roman mythology, but as such names started to dwindle, the names of
famous people, literary characters, discoverer's wives, children, and even television characters
were used! So you want to name an asteroid after yourself? Go discover one
Meteor & Meteorite
Meteors are asteroids that burn and vaporize upon entry into the Earth's atmosphere; commonly
known as "shooting stars." If a meteor survives the plunge through the atmosphere and lands on
the surface, it's known as a meteorite. Meteorites are usually categorized as iron or stony. As the
name implies, iron meteorites are composed of about 90 percent iron; stony meteorites are made
up of oxygen, iron, silicon, magnesium and other elements.
Comets
Comets contain dust, ice, carbon dioxide, ammonia, methane and more. Some researchers think
comets might have originally brought some of the water and organic molecules to Earth that now
make up life here. Comets orbit the sun, but most are believed to inhabit in an area known as the
Oort Cloud, far beyond the orbit of Pluto. As a comet gets closer to the sun, the ice on the surface
of the nucleus begins turning into gas, forming a cloud known as the coma. Radiation from the sun
pushes dust particles away from the coma, forming a dust tail, while charged particles from the

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sun convert some of the comet's gases into ions, forming an ion tail. Since comet tails are shaped
by sunlight and the solar wind, they always point away from the sun. In general, comets are named
after their discoverers. For example, comet Shoemaker-Levy 9 got its name because it was the
ninth short-periodic comet discovered by Eugene and Carolyn Shoemaker and David Levy.
The comet Shoemaker-Levy 9 collided spectacularly with Jupiter in 1994, with the giant
planet's gravitational pull ripping the comet apart for at least 21 visible impacts!
Can the NASA save us?
Unfortunately, they are not as informed or equipped as they are shown in the Hollywood movies.
But they are trying, and for now, it seems that they are trying to learn from the story of the movie
where our hero Bruce Willis single-handedly deflects an asteroid by digging a hole in it and
detonating a nuclear device! Yes, we are talking about the movie Armageddon.
In 2005, in a bill authorizing space-program funds, the US Congress asked NASA for a plan to identify,
track and deflect all manner of PHOs (potentially harmful objects) that could pose a threat. With that
congressional directive (as if they were waiting for it!), NASA considered many science-reality
options, including some that bore resemblance to film plots.
Among the solutions NASA studied were firing a nuclear missile at the asteroid, landing a nuclear
bomb on the surface, drilling into the great space rock and exploding a nuclear bomb there (which
Bruce Willis attempted to do in the film, Armageddon), and all those same strategies with
conventional bombs.
In case there was enough time available to deflect the asteroid NASA also considered few weird
options! Those included flying a spacecraft near the asteroid for a long time to act as a gravity
tractor and pull it off course (this idea was rejected ultimately); using a large mirror to focus
sunlight and boil off some material from the asteroid; attaching a spacecraft to the asteroid and
pushing it out of the way; and what the NASA called the Enhanced Yarkovsky Effect altering the
reflectiveness of a rotating asteroid and counting on the radiation from sunheated material to
push the asteroid off course.

The nuclear bomb was the winner idea NASAs current solution to deal with the earth
colliders of the future is the bomb. You have to watch Armageddon to know how difficult it
may be to implement this! This becomes an example where reality follows science fiction
o

In its report to the Congress, the NASA said, In the impulsive category, the use of a
nuclear device was found to be the most effective means to deflect a PHO. Because
of the large amount of energy delivered, nuclear devices would require the least

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amount of detailed information about the threatening object, reducing the need
for detailed characterization. While detonation of a nuclear device on or below the
surface of a threatening object was found to be 10-100 times more efficient than
detonating a nuclear device above the surface, the standoff detonation would be less
likely to fragment the target. A nuclear standoff mission could be designed knowing
only the orbit and approximate mass of the threat, and missions could be carried out
incrementally to reach the required amount of deflection. Additional information
about the objects mass and physical properties would perhaps increase the
effectiveness, but likely would not be required to accomplish the goal.

By the way, NASA is not waiting for the space rocks to come to us to study them. It has
launched various missions in the last two decades to know them better. The important ones
among them are
o

Near-Earth Asteroid Rendezvous (NEAR)

Deep Impact

Deep Space 1 (DS1)

STARDUST

Hayabusa (MUSES-C)

Dawn

Rosetta

EPOXI

Stardust-NExT

Are we safe from Asteroids? No. Whether the nuclear bomb can deflect or destroy the approaching
asteroids can only be known for sure, when one of them is headed towards the earth! There will be
massive destruction and even if fragments of a large asteroid manage to reach earth, a large part of
it will be destroyed. While we worry about the trivial problems of our lives (you know the types
exams, jobs, marriage), it is surprising how little we worry about the little knowledge that we have
about our planet and its neighbours. TestCracker wants everyone to be a part-time astronomer and
admire the beauty and majesty of the universe. The biggest problems of our lives are the
metaphysical ones Who are we? Why are we here? Where do we go next?!
Shame on you for worrying about the minor problems

Quick Questions
Q. What is this Shiva Crater we often hear about?

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A. For decades one of the more popular theories for what killed the dinosaurs has focused
on a single asteroid impact 65 million years ago. The Shiva crater is a geologic structure,
which is hypothesized by Sankar Chatterjee and colleagues to be a 500 km in diameter
impact structure. This geologic structure consists of the Bombay High and Surat Depression.
They lie beneath the Indian continental shelf and the Indian Ocean west of Mumbai, India.
Chatterjee named this structure after Shiva, the Hindu god of destruction and renewal. He
suggests that the Shiva asteroid impact was powerful enough to vaporize Earth's crust and
eliminate all life forms (including the dinosaurs) 65 million years ago. This theory is yet to be
formally accepted.
Q. Who decides what to do in space?
A. The world is good at coming up with treaties and agreements (even if it cannot come up
with solutions!). The Outer Space Treaty, formally the Treaty on Principles Governing the
Activities of States in the Exploration and Use of Outer Space, including the Moon and
Other Celestial Bodies, is a treaty that forms the basis of international space law. The
treaty was opened for signature in the United States, the United Kingdom, and the Soviet
Union on 27 January 1967, and entered into force on 10 October 1967. As of May 2013, 102
countries are states parties to the treaty, while another 27 have signed the treaty but have
not completed ratification.
The Outer Space Treaty provides the basic framework on international space law, including
the following principles:

the exploration and use of outer space shall be carried out for the benefit and in the
interests of all countries and shall be the province of all mankind;

outer space shall be free for exploration and use by all States;

outer space is not subject to national appropriation by claim of sovereignty, by


means of use or occupation, or by any other means;

States shall not place nuclear weapons or other weapons of mass destruction in
orbit or on celestial bodies or station them in outer space in any other manner;

the Moon and other celestial bodies shall be used exclusively for peaceful purposes;

astronauts shall be regarded as the envoys of mankind;

States shall be responsible for national space activities whether carried out by
governmental or non-governmental entities;

States shall be liable for damage caused by their space objects; and

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States shall avoid harmful contamination of space and celestial bodies.

Q. We are still confused about the difference in definitions of the space rocks. How can we
remember the differences?
A. There is always a trick or two with us! The real difference is in their location. An asteroid
is always going to be in space. Once it enters an atmosphere it becomes a meteor, then a
meteorite if it hits the ground. A meteorite is always going to be on the ground. Each is
made of the same basic materials: metal and rock. Each originates in space. The main
difference is where they are when they are being observed!

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Inflation Indexed Bonds vs. Gold


You invested certain amount at a fixed interest rate of (lets say) 8% for a year. The average annual
inflation for that year turned out to be 10%. How much money would you actually make at the end
of the year? Well, you will lose 2%! Inflation eats into fixed income securities, eroding wealth and
discouraging people from putting money in the banks. That money is diverted to buying items which
will benefit from the rising inflation and can be easily sold too. Gold is the safest such option. The
government will launch of the first tranche of inflation-indexed bonds (IIBs) worth Rs.1,000 crore
today through auctions to take away household savings from gold by providing an alternative
avenue for hedging against the price rise for a positive real return on investment. We have
previously analysed the devastating impact of Gold Imports on our Current Account Deficit. We also
know what goes wrong when the CAD becomes high through our session - 'the deficit disaster'.
Today we look at the theory behind the IIBs Inflation Indexed Bonds. Let us see if they can outshine
gold!
About the IIBs
In the last many months, depositors have seen negative returns on fixed income investments (like
fixed deposits), as inflation has been high and interest rates (comparatively) low - while inflation had
been hovering at about 10 per cent (it has come down in the months of April and May but still
above the RBIs comfort level), interest rates on fixed deposits stood at an average of eight per
cent, leaving investors saddled with a loss of two per cent on their investments.
Today, the Reserve Bank of India will launch inflation-indexed bonds, a boon during times of high
inflation.

These bonds would be linked to the Wholesale Price Index (WPI) which may also be a
reason why many investors will stay away from them (more on this in a bit)!

Inflation-indexed bonds would have a fixed real coupon rate and a nominal principal value,
adjusted against inflation. Periodic coupon payments are paid on an adjusted principal.
o

If it sounds confusing, here is an example. You invested 100 Rs at a rate of 8% in the


IIBs. The average annual inflation turns out to be 10%. Now, you will be paid 8% on
Rs 110 (not 100, as in the case of other fixed income bonds). So under IIBs you will
get back 110 x 108% = Rs 118.80 while in the other case you would have only got
100 x 108% = Rs 108!

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Therefore, these bonds provide inflation protection to both the principal, as well as the
interest payment.

Since the coupon would be paid on the adjusted principal, the final yield, or the cash the
investor receives in hand, would fluctuate, depending on the WPI movement.

On maturity, the investor would receive the adjusted principal or the face value, whichever
is higher. It means that in case inflation turns out to be negative (deflation), which is highly
unlikely in India, it is not that the principal amount will become lesser than the amount
invested so the downside is limited.

Individual investors can invest from Rs.10,000 to Rs.2 crore.

Interest will be paid half-yearly.

There are no tax concessions for investing in these bonds. Presumably, tax will be deducted
at source on these investments. This could be a major shortcoming.

The IIBs will have a ten-year tenure, and funds mobilised can be deployed in infrastructure
areas. Pension funds and insurance companies should find them attractive.

In the first tranche (June 4), Rs 1,000 crore of inflation-indexed bonds would be issued, of which 20
per cent would be reserved for retail investors. Based on initial issuances, the second series of
these bonds for retail investors is proposed (by the RBI) to be issued in the second half of this
financial year.

Retail investors should consider investing in these bonds, as these are inflation-adjusted and,
therefore, commit a real rate of interest to the investor, against regular bank fixed
deposits (FDs), which pay a fixed interest on the principal.

The governments earlier attempts at introducing inflation-linked bonds in 1997 and 2004
did not catch investors attention mainly because only the principal was indexed to
inflation. This time, however, the bonds will be structured in a way that they protect
investors more comprehensively. Both the principal and interest will be hedged to a large
extent from the fluctuations of inflation.

Disadvantages
One big disadvantage inflation-indexed bonds have is that the interest is linked to the Wholesale
Price Index (WPI). Compared to WPI, the consumer price index (CPI) is a better representative of the
consumer's purchase power.

For example, in April, WPI-based inflation stood at 4.9 per cent, while CPI-based inflation
stood at 9.4 per cent!

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Since the differential between these indices is substantial, if the interest is linked to CPI,
these bonds could act as an alternative investment to gold, by offering a hedge against
inflation.

Liquidity is another important factor to consider. To have the bonds is one thing to be able to trade
them is another! Remember that the IIBs are fighting against gold!
All this to discourage gold imports
Gold demand in India the worlds largest consumer needs to brought down from the current
level of 1,000 tonnes per year to 700 tonnes, which prevailed few years ago. The recent surge in gold
demand is creating some distortions and need to be rolled back to boost growth by reversing the
trend of declining financial savings and keeping Current Account Deficit within prudent limit by
containing gold demand. The insatiable demand for gold has driven up imports and contributed to a
serious macro-economic problem in the form of an unsustainable current account deficit. The hope
is that the inflation indexed bonds will become popular with those investors who invest in gold as
well as real estate and other non-financial avenues.

The countrys CAD has widened due to increased gold imports, which rose to 1017 tonnes in
2012-13 from 471 tonnes in 2000-01. Gold imports during last year accounted 72 per cent of
the CAD.

Like we said above, you must read a previous session of TBI, 'the deficit disaster' in order to
understand clearly and completely the definitions and implications of various deficits. Here
is one excerpt from the post
I.

Current Account, as the name itself suggests, reflects the immediate trade and transfers
position of the country with the rest of the world. It includes trade in goods and services
and invisibles.
i

Goods - These are movable and physical in nature, and in order for a
transaction to be recorded under "goods", a change of ownership from/to a
resident (of the local country) to/from a non-resident (in a foreign country) has
to take place.

ii

Services - These transactions result from an intangible action such as


transportation, business services, tourism, royalties or licensing.
Trade Deficit It is simply the difference between the total imports
(goods and services) and total exports (goods and services). India, of
course, runs a trade deficit.

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iii Income - Income is money going in (credit) or out (debit) of a country from
salaries, portfolio investments (in the form of dividends, for example), direct
investments or any other type of investment.
iv Current Transfers - Current transfers are unilateral transfers with nothing
received in return. These include workers' remittances, donations, aids and
grants, official assistance and pensions. Due to their nature, current transfers
are not considered real resources that affect economic production.
The invisible balance or balance of trade on services is that part of the balance
of trade that refers to services and other products that do not result in the
transfer of physical objects. Examples include consulting services, tourism, and
patent license revenues.
Remittances sent back home by Indians from foreign countries is a very big
component of our Current Account. India was the largest recipient of
remittances in 2012 with $70 billion as migrant remittances in one year,
followed by China with $66 million. Yes, one instance where we defeated China

Indians also imported gold worth 60 billion dollars in 2012 we guess


when Indians receive money from their relatives in Gulf countries, they
rush to buy gold
The expectations are large from the IIBs. But it is extremely doubtful whether the IIBs can divert
money going into gold jewellery. Remember that more than half of the gold imports in India go into
the making of jewels, with only a portion of the balance getting invested in gold-backed instruments.
It is highly unlikely that the IIBs will attract the money invested in gold jewellery. The pretty ladies of
India wont like the idea of wearing bond papers in place of gold jewellery When the price comes
down, they buy more gold (come on, it is cheap!) when the price goes up, they buy more (come
on, who will wait for the price to increase more!)

Quick Questions
Q. How much gold can I bring back from the gulf countries without paying any duty?
A. The Finance Minister announced in the Budget 2013 that duty free gold limit has now
been increased to Rs 50,000 in case of male passenger and Rs 1,00,000 in case of a female
passenger subject to conditions.
Q. What is the current trend in gold imports by India?

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A. The gold price has been coming down. Well, Indians have not let go of this opportunity!
India imported around 162 tonnes of gold in May. April's imports were 142.5 tonnes, which
was sharply higher than the same month of previous year. Such hefty imports threaten to
widen a current account gap which already hit a record 6.7 percent of GDP in the December
quarter.

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RTI applicable to Political Parties


You will rarely see this in India. All the major political parties are united in their stand against the
recent ruling by the Central Information Commission that they are public authorities who now need
to respond to the Right to Information (RTI) queries within six weeks. The decision came in the wake
of a complaint filed by the leading RTI campaigner Subhash Chandra Agrawal, along with Anil
Bairwal. The issue relating to the disclosure of the accounts and funding of Political Parties had been
raised by both these people. We advise you to first read our detailed explanation on the evolution
and the current mechanism of funding of political parties in India. The current judgment by the CIC is
of immense importance and will serve as a powerful tool in the hands of the activists. The political
parties are surely taking the matter to the Supreme Court. After this order of the full bench of CIC,
the parties will be answerable to the citizens regarding their source of funding, how they spend
money and choice of candidates for elections, among other issues. To be fair to them, this ruling will
make their lives very difficult, especially considering the fact that the Lok Sabha elections are coming
up! Are the political parties really public authorities? Can this ruling be practically implemented? Is
this the next level of the RTI movement in India? Let us look at the evolution of the RTI and the
implications of this ruling.
The Case
By his RTI application dated 16.5.2011, S.C. Aggarwal had sought the following information from the
Presidents/Secretaries of the Bhartiya Janata Party (BJP) and he had sent a similar request to the
Indian National Congress (INC/AICC) 1. Copies of Election Menifestoes by BJP for Lok Sabha elections in the years it formed NDA
govenment with Shri Atal Bihari Vajpayee as Prime Minister.
2. Were all the promises made in these election manifestoes fulfilled after BJP having formed
government at the Centre? (TestCracker believes that it takes courage to even ask such
questions!)
3. If not, list of promises highlighted in BJP election manifestoes but remained unfulfilled
after BJP came to power.
4. Outline of receipts (separately by cash/online/cheque etc) by BJP in last two years
separately for each year for which updated account information may be there.
5. Outline of payments (separately by cash/online/cheque etc.) made by BJP in last three
years separately for each year for which updated account information may be there.

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6. Is it compulsory for every BJP legislature either at Centre or in States or in civic bodies etc to
contribute towards party funds?
7. If yes, please provide complete and detailed information including also defaulters in making
such contributions to party fund in last three years.
8. Is BJP aware of any of its legislatures (both at Centre and in States)/civic body member etc.
involved in corrupt and other malpractices in last three years?
9. If yes, please provide complete details including action taken by party and others against
such persons.
10. Has B.J.P. suggested any proposals to Union government /Election Commission towards
electoral reforms?
11. If yes, please provide complete details including reply received from concerned ones if any.
12. Any other related information;
13. File notings on movement of this RTI petition and on all aspects mentioned in this RTI
petition
The Congress and the BJP both replied on expected lines, saying that they dont come under the
purview of the RTI Act, because they are not public authorities. Anil Bairwal had sought similar
information from the other national parties (NCP, CPI(M), CPI, BSP).

Please note that now there are only six recognised national parties in India - the Congress,
the Bharatiya Janata Party, the Communist Party of India (CPI), the CPI (M), the Bahujan
Samaj Party and the Nationalist Congress Party.
The Rashtriya Janata Dal (RJD), which was earlier considered a national party, was
relegated to being only a recognised State level party in Bihar, Jharkhand and
Manipur from 2010 onwards.

The total number of State parties is 52 and registered unrecognised parties, 1112.

Criteria for qualification as a national party If a political party is treated as a recognised political party in four or more States, it
shall be known as a `National Party throughout the whole of India.
'State includes the National Capital Territory of Delhi and the Union Territory of
Pondicherry.

If a political party is treated as a recognised political party in less than four States, it
should be known as a `State Party in the State or States in which it is so recognised.

Criteria for qualification as a national party -

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A political party shall be treated as a recognised political party in a State, if and only if either
the conditions specified in Clause (A) are, or the condition specified in Clause (B) is,
fulfilled by that party Clause (A): that such party
has been engaged in political activity for a continuous period of five years; and
has, at the last general election in that State to the House of the People, or, as the
case may be, to the Legislative Assembly of the State, returnedi

at least one member to the House of the People (Lok Sabha) for every
twenty-five members of that House or any fraction of that number from
that State; or

ii

at least one member to the Legislative Assembly of that State for every
thirty members of that Assembly or any fraction of that number;

Clause (B): that the total number of valid votes polled by all the contesting candidates set up
by such party at the last general election in the State to the House of the People, or to the
Legislative Assembly of the State, is not less than six per cent of the total number of valid
votes polled by all the contesting candidates at such general election in the State.
National Party = Public Authority?
After the above detour, we continue the story of the RTI application which has changed the game
completely. Let us begin with the basics. How is a public authority defined in the RTI Act?
Section 2(h) of the RTI Act defines public authority as follows:public authority means any authority or body or institution of selfGovernment established or
constituted,-a. by or under the Constitution;
b. by any other law made by Parliament;
c. by any other law made by State Legislature;
d. by notification issued or made by the appropriate Government, and includes any i

body owned, controlled or substantially financed;

ii

non-Government Organisation substantially financed, directly or indirectly by


funds provided by the appropriate Government;

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Subhash Chandra Agrawal had filed a complaint dated 6th September, 2011, before the CIC in which
he had mentioned that All India Congress Committee and Bhartiya Janata Party, being national
parties, had got premium land in Delhi/New Delhi at zonal variant institutional rate which was
much less than the prevailing market rate and, therefore, it was not correct on their part to plead
that they did not fall under the purview of the RTI Act.
S C Agrawal and his team presented powerful arguments to prove that the National Parties are
actually public authorities The State has been indirectly financing various Political Parties by way of free air time on All
India Radio/Doordarshan and various tax exemptions given to the National Parties of India.
The tax exemptions are nothing but indirect funding of the national parties!
Tenth Schedule to the Constitution vests tremendous powers with the Political Parties in as
much as they can oust an elected member whether MP or MLA from out of the Party if
he steps out of the party line. The vast power of the Political Parties has been recognised in
this Schedule and, therefore, if purposive interpretation of the Tenth Schedule is made, then
the Political Parties can be deemed to be covered under Section 2(h) of the RTI Act.
As we have seen in our session - funding of political parties in India - as per the
Representation of People Act, 1951, all donations of and above Rs. 20,000/- made to
Political Parties are required to be reported to the Income Tax Department. This obligation
cast on the Political Parties points towards their public character.
Election Commission allots symbols to various Political Parties. The Election Commission is
an instrumentality of the State. Allotment of election symbols by the Election Commission
to various Political Parties is suggestive of the public character of the Political Parties.
The Central Government and the State Governments have allotted huge plots of
land/buildings/other accommodation in prime locations to all Political Parties all over the
country either, free of cost, or on hugely concessional rates. This also amounts to indirect
financing of the Political Parties.
The Judgment
The Commission, a quasi-judicial body, has said six national parties Congress, BJP, NCP, CPI-M, CPI
and BSP have been substantially funded indirectly by the central government and they have the
character of public authority under the RTI Act as they perform public functions.
The CIC thought it pertinent to note that the National Parties have been brought into existence first
as political parties and then as national level political parties by the Election Commission of India

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thereby entitling them to a host of benefits, the principal among them being the right to accept
contribution from both individual citizens and private companies and also to get complete income
tax exemption on all their incomes. The other important benefit that accrues to these political
parties on account of their recognition by the Election Commission of India as national level political
parties is the common symbol on which their candidates can contest elections. Therefore, at least
in spirit, these political parties can be said to have been constituted by their registration by the
Election Commission of India, a fact akin to the establishment or constitution of a body or institution
by an appropriate government. The commission also took into account I-T exemptions given to
political parties and found that during the last three years BJP got Rs 141.25 crore, Congress (Rs
300.92 crore), BSP (Rs 39.84 crore), CPM (Rs 18.13 crore), CPI (Rs 24 lakh) and NCP (Rs 9.64 crore)
as tax relief.
Basically, the CIC bought the arguments by the complainants (Agrawal and Bairwal) that the
national parties are (indirectly) substantially funded by the state and that in terms of
exercise of their power (they can expel the MPs & MLAs!) too, they are of public nature.
So what happens next?
TestCracker is confident that most of the six parties will file review petitions with the Supreme Court
against this judgment. Most parties argue that this judgment will harm the democratic institutions
and that political parties are not public authorities. It will be tough for them to demonstrate how
revealing sources and nature of funding will harm the democratic set-up. RTI has come a long way
the Congress has always taken credit for enacting the RTI now it is at the receiving end! It will be
tough to implement this judgment in retrospect. The political parties may be willing to reveal their
sources of funding in the future, but not dig into their past (many skeletons will come out!). What
happens if all the Political Parties refuse to reveal the information will the Election Commission
disqualify them? Should the Election Commission also add a clause to reflect this judgment? Many
interesting questions will come up because of this judgment. Lets wait and watch and read!
We can tell you this if the judgment stays (which is the most likely case), the state parties
would stop aspiring to upgrade to national parties
May be the next step is to prove that even the state parties are public authorities. Many
accountants will be hired now it is a good time to be an accountant in India!
We would like to conclude on a thought provoking note. The Law Commission of India in their 170th
Report on Reform of Electoral Laws (1999) had beautifully described the need for transparency on
the part of the political parties -

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If democracy and accountability constitute the core of our constitutional system, the same concepts
must also apply to and bind the Political Parties which are integral to parliamentary democracy. It is
the Political Parties that form the Government, man the Parliament and run the governance of the
country. It is therefore, necessary to introduce internal democracy, financial transparency and
accountability in the working of the Political Parties. A political party which does not respect
democratic principles in its internal working cannot be expected to respect those principles in the
governance of the country. It cannot be dictatorship internally and democratic in its functioning
outside.

Quick Questions
Q. Under the RTI Act, is it required to give any reason for seeking information?
A. The information seeker is not required to give reasons for seeking information!
Q. I am still not clear about the definition of a public authority can you explain again?
A. A "public authority" is any authority or body or institution of self-government established
or constituted by or under the Constitution; or by any other law made by the Parliament or a
State Legislature; or by notification issued or order made by the Central Government or a
State Government. The bodies owned, controlled or substantially financed by the Central
Government or a State Government and non-Government organisations substantially
financed by the Central Government or a State Government also fall within the definition of
public authority. The financing of the body or the NGO by the Government may be direct or
indirect.
In this judgment, the CIC said that the term Public Authority has to be interpreted
liberally and not restrictively.

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Current Affairs

Latvia is the Eighteenth


Latvia has got the go-ahead to adopt the Euro from 2014, signalling to the world that the crisis
ridden euro zone is still expanding. Although fewer than 40% Latvians like the idea, their country will
become the 18th member of the single currency bloc from the start of next year. Latvian Prime
Minister Valdis Dombrovskis maintains that switching to the euro would foster growth, bring
increased foreign investment and upgrades of Latvias credit ratings. The euro, launched as notes
and coins on January 1, 2002, is now used by around 330 million people and has become a major
reserve currency. To adopt the euro, Latvia had to meet five entry criteria: low inflation and longterm interest rates, a stable exchange rate and low public debt and deficits. We have kept saying
that Euro Zone will remain a burning issue for some time to come. Previously we have discussed the
crisis of Cyprus, and entry of Croatia as the newest member of European Union. Today we look at
the process, advantages and disadvantages of joining the Euro Zone.
About the Euro
The euro is the currency used by the Institutions of the European Union and is the official currency
of the eurozone, which consists of 17 of the 27 member states of the European Union (Croatia set
to become the newest member of the EU in June-end). Launched in 1999, Europes single currency
is now shared by 17 EU countries and around 331 million citizens, making it one of the worlds most
important currencies and one of the EUs greatest achievements. Additionally, more than 175 million
people worldwideincluding 150 million people in Africause currencies pegged to the euro.
The euro is the second largest reserve currency as well as the second most traded currency
in the world after the United States dollar.

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Under the EU's treaty, all EU members must adopt the euro eventually although it can take years
to meet the tough requirements. The only exceptions are Britain and Denmark, which were given
opt-outs.
Euro entry criteria:
Low inflation
Low long-term interest rates
A stable exchange rate
Low public debt
Low public deficits
Since late 2009, the euro has been immersed in the European sovereign-debt crisis which has led to
the creation of the European Financial Stability Facility (to take care of all the bail-outs) as well as
other reforms aimed at stabilising the currency. Questions have been asked about the sustainability
of the Euro and many experts say it is just a matter of time before Euro Zone disintegrates. The
decision by Latvia to join this zone at this time is a big morale booster to the zone.
The current 17 members are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany,
Greece, Republic of Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia,
Slovenia, and Spain.
The Crisis in the Euro
Its difficult to not hear about the Euro crisis! But in case you are not well versed with Economics and
its jargons, you may be irritated by the use of terms such as bond yield, Grexit, haircut and
junk whenever someone tries to explain what exactly this crisis is. We will try to keep our
explanation jargon free. By the way, TestCracker believes that one big reason why everyone should
study economics is that no economist should be able to fool you with his jargons
Simply put, Europe is in crisis because it has been living beyond its means. No single European
country is to blame; the entire eurozone arguably threw economic caution to the wind. They
thought they can keep borrowing and spending forever.
During the good times, countries in the eurozone could borrow money cheaply, at low
rates of interest. Because of this cheap debt the euro countries, lured by the prospect of
economic growth, began to borrow more and more. If the interest rates had remained low,
perhaps the debt crisis could have been averted, but they didnt. They rose.

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Eventually the eurozone had taken more debts than it could repay and just at the point
when Europes spending spree was going out of control, rising interest rates came along to
ruin Europes spending party.
o

Higher interest rates meant that Europe was suddenly facing a substantial debt.
Whereas before, Europe was borrowing at an affordable level (i.e. at a low rate of
interest that it could easily repay), all of a sudden, the repayments werent quite so
affordable any longer.

For Eurozone, the problem was compounded by the fact that it is a currency union. If one
country using the euro currency cant make repayments, the flow of cash between the euro
zone stagnates.
Then came the bail-outs! The rest of the Europe had to finance the failing countries,
beginning with Greece. But with bailouts came tough conditions, collectively called,
austerity which simply means that governments need to spend less and stay within means.
Austerity is very unpopular, because it makes life very hard. It also divides people into two
camps: supporters (who argue that austerity is the best last-ditch solution to reduce debt)
and detractors (who believe that austerity blacklists a country, panicking investors and
delaying economic recovery).
There is no single solution to this complicated crisis. Most countries are struggling with recession
(we have discussed the meaning of recession before if two consecutive quarters have negative
GDP growth rate, then the country is said to be in recession read our post on Triple Dip Recession).
About Latvia
It is a beautiful Baltic country! Latvia is a country in the Baltic region of Northern Europe. With close
to 2 million people and a territory of 64,589 km2, it is one of the least populous and least densely
populated countries of the European Union.
The capital of Latvia is Riga.
The official language is Latvian and the currency (till 2013) is called Lats (Ls).

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Quick Questions
Q. What is the idea behind the single currency?
A. The idea behind the single currency is that getting rid of national currencies would make
the operation of a single market easier. This requires the EU to become what economists
call an 'optimal currency area', which effectively operates as one economy. Euro notes look
the same wherever you are in the Eurozone - they come in denominations of 5, 10, 20, 50,
100, 200 and 500 Euros. The coins have different national images on the reverse side. Coins
and notes issued in one Eurozone country can be used in any other Eurozone country.
Q. How popular is Euro as a reserve currency?
A. It was supposed to challenge the US Dollar but then came the crisis. It is still the second
largest reserve currency. Close to 27% of worlds foreign exchange reserves are held in
Euros.

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Gezi Park & the Woman in Red Dress


We arent sure if this too may be clubbed with other acts of the Arab Spring. Turkey's worst unrest in
decades looks set to build up further after the Prime Minister said he will still go ahead with the plan
to redevelop the Gezi Park yes, such massive unrest is the result of an attempt to redevelop a park!
The demonstrations spread after police cracked down on protests over the redevelopment of this
park in Istanbul. The protests in Turkey that began over government plans to uproot trees in
Istanbul's main square (Taksim) to make way for a shopping mall have now lasted a week. The
protests have grown into something much bigger than protecting trees, drawing on a deep
undercurrent of discontent against what many feel is the increasing arrogance of Prime Minister
Recep Tayyip Erdogan. The man who has dominated the political landscape of Turkey for the past 11
years, and has steered his Islamist-leaning Justice and Development (AK) Party party to three
election victories, is facing the biggest challenge of his career. So, is Turkey the new focal point of
the Arab Spring? What has Erdogan done to invite such wrath? This becomes important because
Turkey is the only liberal democracy in the Middle East region and plays a key role in most
negotiations.
About Recep Tayyip Erdogan
Prime Minister Recep Tayyip Erdogan is arguably the most successful leader in Turkey's democratic
history. In his third term as the PM now, he has also brought economic and political stability to a
country that not long ago lurched from one crisis to another. During his premiership the economy
has grown strongly and Turkey is becoming a manufacturing and export powerhouse. He also
showed courage in keeping control over an army which once stepped into politics - and overthrew
elected governments.
His biggest criticism is that of trying to reverse the liberal secular revolution of Turkey by harbouring
a secret agenda to turn Turkey into a religious society. He often refers to his country as a liberal
Muslim country, annoying many secularists. There is no doubt that his attempts to bring back
religion under the domain of the state (remember secularism is nothing but separation of state and
religion) have won him many supporters. He has denied wanting to impose Islamic values on his
countrymen. He has said he is committed to secularism - although he does not think it should be at
the expense of Turks who want to express their religious beliefs more openly. He makes a statement
through his wife Emine, who wears the headscarf in public functions. Headscarf has long been
banned in government offices, schools and universities.

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Mr Erdogan's main ambition in his current third term is to rewrite the constitution. There is
speculation that he wants to concentrate more power in the hands of the president - and then move
into that post himself! He has won more critics by making attempts to ban alcohol (he has
introduced alcohol-free zones and now wants to ban consumption of alcohol at night!)
In the international arena, his willingness to condemn Israel - previously a strong ally of Turkey - over
its treatment of the Palestinians has not only strengthened his Islamic base, but has also made him a
hugely popular leader across the Middle East. He has taken the lead in supporting Syria's opposition
in its armed revolt against the government in Damascus, though the policy has raised fears that the
violence might spill over on to Turkish territory.
He started well, but now he is seen responsible for bifurcating Turkey into those who support
secularism and those who want the government to become more Islamic in nature and action.
The Protests
The unrest began on 28 May as a protest to stop the demolition of one of Istanbul's rare central
green spaces. Gezi Park is located in Taksim Square, the heart of the modern city and a focal point
of huge symbolic value to many Istanbul residents and Turks with secular leanings. The development
plans envisage building a mosque and replica of old barracks on the square, in a city which already
has many mosques. Tempers were already high after police stopped leftist marchers holding a May
Day rally on the square this year.
Gezi Park - an area inside Taksim Square, filled with trees - is one of the few green spaces
left in central Istanbul.
It has been compared with Cairo's Tahrir Square - the focus of the demonstrations which
toppled President Hosni Mubarak in 2011 - and protesters' banners claim that redeveloping
the park is akin to the commercial takeover of Central Park in New York, or Hyde Park in
London.
Under the redevelopment plans, the government wants to pedestrianise and ease traffic
around Taksim Square, which effectively means much of Gezi Park will be replaced by
concrete.
There is also a deeply political aspect. For some Turks, the proposed reconstruction of the barracks
has a symbolic significance. It was at the barracks that a (failed) mutiny by Islamic-minded soldiers
was initiated in 1909, in support of the Ottoman Sultan Abdul Hamid II, and intent on bringing in
Sharia law.

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The barracks were demolished in 1940, and attempts to rebuild them are seen by opponents
to have the ring of Islamism and neo-Ottomanism.
This protest has now become about more than just Gezi Park.
It has broadened into a wider expression of anger at what protesters see as the government's
increasing authoritarianism - and also the heavy-handed tactics of police who used tear gas and
water cannon to disperse a peaceful rally, resulting in scores of injuries.
The Social Media is abuzz with funny one-liners like, "Help, Police! Oh never mind, you must be
busy", "Welcome to the gas festival", and the best one - "Tear gas works wonders on your
complexion."
The bottom line is that now the situations seems to be getting out of the hands of the police and the
PM is showing no inclination to offer an apology (there have been a couple of deaths and thousands
of arrests at the hands of the police).
Every protest needs a symbol, especially in this age of social media. The symbol of Turkish protests is
the woman in red dress.

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Ceyda Sungur, an academic at Istanbul's Technical University, had gone to Gezi Park to defend it
against a controversial redevelopment project to concrete over one of the last green spaces in the
city. When Ms Sungur arrived, she found herself in front of a line of riot police. One of them bent
down and fired tear gas at her, leaving her gasping for breath.
Reuters photographer Osman Orsal captured the moment, and the images soon went viral
on social media, in cartoons and as stickers and posters used by other protesters.
In the city of Izmir, her picture has even been transformed into a giant billboard.
Sympathisers can put their head through a hole where Ms Sungur's face should be, and pose
for photos.
The images make good publicity for critics of the government.
In her modest red dress, carrying a small shoulder bag, Ms Sungur looks more like she's
going to a summer fete than a violent protest - adding weight to the demonstrators'
argument that the police were too heavy-handed.
TestCracker recommends If you want to be an international celebrity, dress up well (for ladies) or
weirdly (for men) and head straight for the water cannons.strike a weird pose and wait till the
photographers capture the moment. We are yet to see such a symbol in our anti-corruption
protests. Dont miss the chance when they come together next in Jantar Mantar!

Quick Questions
Q. What are the demands of the protesters?
A. They have asked for the scrapping of plans to redevelop the Gezi Park, the sacking of
police chiefs in Istanbul and other cities, a ban on the use of tear gas, and the release of
detained protesters.
Q. You did not answer Is this the Turkish edition of Arab Spring?
A. The Arab Spring Movement was triggered by lack of democracy and development in the
Arab countries. Turkey is not comparable to those Arab countries which had never known
democracy. Firstly, the government owes its legitimacy to three successive election victories.
The AKP (party to which the PM belongs) won the last polls, in 2011, convincingly with
international monitors generally satisfied that they had been conducted fairly. Secondly, Mr
Erdogan and his party appear to still enjoy enough support in the wider country. Thirdly,
under the AKP, Turkey has enjoyed economic growth as well as growing prestige as a
regional power.

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Current Affairs

The never-ending Vodafone tax case


The government of India has been behind Vodafone since the last 5 years, like its famous pug who
follows the kid in the ad wherever it goes. In the course of this chase, it has thrown up many
complex legal and financial questions. It has also exposed the vulnerability of the many bilateral
investment treaties which India has been relentlessly pursuing in recent years. The Supreme Court
decided in favour of Vodafone the government then amends the rules of taxation to allow the
government to tax retrospectively! Even the Prime Minister of the United Kingdom, on his visit to
India, brought this issue up for discussion (Vodafone is a British company). The latest twist is the
attempt by the government to reach a settlement with Vodafone. The intention seems to be to
reach a non-binding settlement with Vodafone and then take it to Parliament, as the mechanism of
settlement is not under the ambit of the Income-Tax Act. It's far from clear if the BJP will cooperate
given the bitterness that exists between the two main political parties. Whether you are a student of
Law or Finance or Administration, you just cannot ignore this fascinating case which we discuss
today.
The Case
Vodafone has been embroiled in a $2.5 billion tax dispute (approximately Rs 11,500 crore) with the
Indian Income Tax Department over its purchase of Hutchison Essar Telecom services in April 2007.
It was being alleged by the Indian Tax authorities that the transaction involved purchase of assets of
an Indian Company, and therefore the transaction, or part thereof was liable to be taxed in India.
Vodafone Group Plc. entered India in 2007 through a subsidiary based in the Netherlands,
which acquired Hutchison Telecommunications International Ltds (HTIL) stake in Hutchison
Essar Ltd (HEL)the joint venture that held and operated telecom licences in India. This
Cayman Islands transaction, along with several related agreements, gave Vodafone control
over 67% of HEL and extinguished Hong Kong-based Hutchisons rights of control in India,
a deal that cost the worlds largest telco $11.2 billion at the time.
The crux of the dispute had been whether or not the Indian Income Tax Department has
jurisdiction over the transaction. Vodafone had maintained from the outset that it is not liable to
pay tax in India (because the agreement was done outside India with an entity which is not an
Indian company); and even if tax were somehow payable, then it should be Hutchison to bear the
tax liability.

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In January 2012, the Indian Supreme Court passed the judgement in favour of Vodafone
(reversing an earlier decision by the Bombay High Court), saying that the Indian Income tax
department had "no jurisdiction" to levy tax on overseas transaction between companies
incorporated outside India. However, Indian government thinks otherwise. It believes that if
an Indian company, Hutchison India Ltd., conducts a financial transaction, government
should get its tax out of it.
o

The Supreme Court also directed the tax department to return the Rs. 2,500 crore
deposited by Vodafone in compliance with an interim order.

Subsequently, in 2012, India changed its Income Tax Act retrospectively and made sure
that any company, in similar circumstances, is not able to avoid tax by operating out of
tax-havens like Cayman Islands or Lichtenstein.
In May 2012, Indian authorities confirmed that they were going to charge Vodafone about
Rs 22,000 crore (US $4.5 billion) in tax and fines (for late payment).
Following this, international and domestic investors began to raise concerns about
investing in India, which led the government to appoint a committee under tax expert
Parthasarthi Shome to look into the issue.
o

The Shome committee suggested that either the government withdraw the
retrospective tax amendment or waive the penalty.

A final decision on this is yet to be taken, but it is amply clear that if India penalizes
Vodafone for this transaction, it will be very difficult to convince the foreign investors to
remain interested in the India growth story!

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(Image courtesy Outlook)

The Latest Development


The cabinet has approved the start of a conciliation process with the Vodafone Group something
which it was against till now. As mentioned above, last year, the Supreme Court had ruled in
Vodafone's favour, saying that the UK telecom major was not liable to pay any tax over the
acquisition. But later in the year, the Indian government changed the rules to enable it to make
retrospective tax claims on already-concluded deals, drawing criticism from global business groups.
Vodafone had issued a notice for arbitration and the Indian authorities have been in talks with the
British telecom major for months over the tax dispute.
The Finance Minister said after the Cabinet meeting, "We will accept the offer of Vodafone
of a non-binding conciliation...if the outcome is acceptable to the government then we will
have to go back to parliament to make an amendment (to the Income-Tax Act)."
The go-ahead from the Law Ministry came within a day of Kapil Sibal taking over the Law
Ministry.
Experts are divided over the implication of this move by the government. Many think this would give
a signal to the foreign companies in India that they can get away with tax avoidance acts (although
Vodafone will still have to pay a hefty amount, without the fine). Many others think that tax disputes
are rising. In the normal course, they could lead to never-ending court proceedings. This conciliation
measure would benefit companies, especially joint ventures, if the Income Tax and Arbitration Act is
amended.
TestCracker Opinion: This is a positive step forward. In its efforts to show its resolve on this matter
(and may be desperately in need to earn more!), the government has gone too far with the
retrospective tax amendment, and hence it should at least waive off Vodafones penalty associated
with the amendment in this case. As for the government, it will still receive sizable revenues from
Vodafone in the form of tax and interest.
TestCracker is always against any law being enforced retrospectively. We also dislike the fact
that in an examination of the repute of CAT (for entry to Indian Institutes of Management),
they have started giving weightage to the marks of Class X and Class XII. If you change the
rules, it should become applicable to those who are going to appear for Class X examination
after the change of rules not years before it!

Blame it on the Bilateral Treaties

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Last year, Vodafone issued a notice of dispute to the Indian government, as a first step towards
launching investment arbitration proceedings under the India-Netherlands Bilateral Investment
Treaty (BIT) signed in 1995.
The telecom company filed the notice through its Dutch subsidiary, Vodafone International Holdings
BV, asking the Indian government to abandon or suitably amend the retrospective aspects of the
proposed tax legislation under Finance Bill 2012 which allows tax authorities to reopen cases as far
back as 1962. Vodafone termed the retrospective tax proposals denial of justice and a breach of
the Indian government's obligations.
There is a growing line of cases where foreign investors are threatening to invoke international
arbitration proceedings against India under the framework of the Bilateral Investment Treaties
(BITs).
The Russian conglomerate Sistema had sent a legal notice to the Republic of India
threatening international arbitration proceedings under the India-Russia BIT (1994) if the
government failed to settle the dispute related to revocation of its 21 telecom licences in an
amicable way by August 28, 2012. The company claimed that the cancellation of its licences
by the Supreme Court is contrary to India's obligations under BIT, including obligations to
provide investments with full protection and security and obligations not to expropriate
investments.
o

On February 2, 2012, the Supreme Court had ordered the cancellation of all 122
spectrum licences issued in January 2008 by the then Telecom Minister A. Raja. Out
of these, 21 belonged to Sistema.

Following in the footsteps of Sistema, Norwegian telecom company Telenor also


threatened to invoke the India-Singapore Comprehensive Economic Cooperation
Agreement to protect its investments.

The White Industries vs. Republic of India judgment


In 1989, White Industries Australia Limited (WIAL) entered into a commercial contract with
state-owned Coal India Limited (CIL) for supply of equipment and development of a coal
mine for the Piparwar Project in Jharkhand. In 1999, however, contractual disputes arose
between WIAL and CIL. As per the contract, WIAL demanded payment of its performance
bonus while CIL demanded a penalty based on poor quality production and subsequently
encashed White's bank guarantee. The matter went to the International Chamber of

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Commerce's International Court of Arbitration and hearings began in London. In March


2002, the ICC issued an AU$4 million award in favour of WIAL. CIL went to the High Court;
WIAL went to the Supreme Court. Due to the long delays in the judicial process of India,
WIAL then invoked arbitration against the Government of India in July 2010 under the IndiaAustralia BIT (signed in 1999) and argued that the delays amounted to a denial of justice in
violation of several provisions of the treaty especially fair and equitable treatment (FET),
free transfer of funds and expropriation.
This BIT contains the Most Favoured Nation (MFN) clause which allowed WIAL to import
more favourable provisions from other treaties signed by India. Specifically, WIAL drew
upon a beneficial provision under the India-Kuwait BIT which obliges India to provide
effective means of asserting claims and enforcing rights with respect to investment. By
relying on the MFN clause, WIAL sought similar level of protection which Kuwaiti investors
are given in India. WIAL won the case in the international tribunal!
o

We have discussed MFN many times before. Simply put, it binds a country to not
favor any other country any more than it favors the country which it calls as Most
Favored Nation. Therefore, WIAL could claim that it deserves the same protection
as do the Kuwaiti investors in India! By the way, India has given MFN status to
Pakistan too long time back.

India has signed over 80 bilateral investment treaties, and may soon be at the receiving end for
similar claims by foreign investors and the Indian government may end up paying full compensation
or fail to recover avoided taxes. Further, the BIT award raises an important policy concern: whether
Indian courts have the sovereign right to intervene in arbitrations seated outside India.
The morale of the story is simple India needs to go slow on its BITs and be very careful with the
wordings of the treaty.

Quick Questions
Q. Is this case related to GAAR, a term we kept hearing in the first quarter of this year?
A. Indeed it is. General Anti-Avoidance Rules (GAAR) is a concept which generally empowers
the Revenue Authorities in a country to deny the tax benefits of transactions or
arrangments which do not have any commercial substance or consideration other than
achieving the tax benefit. So, the government of India thinks that the takeover of Indian

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assets by Vodafone was finalized in Cayman Islands, a tax haven, only to avoid taxes and
therefore it can invoke GAAR on Vodafone.
Q. What is the current legal status of GAAR?
A. As you can guess, GAAR can become a powerful arbitrary tool in the hands of the IT
department to extract more taxes from various entities. Therefore, more discussion is
needed before the rules are concretized. The enactment of GAAR has been deferred by 2
years, after the Government accepted most of the Shome Commitee recommendations,
which was set up to look into the grievances on GAAR provisions.

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The end of TRP


Some of Indias biggest television networks have decided to stop using Television Audience
Measurement (TAM) Media Research data, the only mechanism to assess TV viewership in the
country. Though most channels have been complaining for years against what they see as TAMs
unfair trade practices and flawed methodology, this is the first time broadcasters have decided to
boycott the system altogether. The Sony Network of Channels, the Times Television Network,
Network 18 and the New Delhi Television (NDTV) have written to TAM to withdraw from the system.
Other networks are expected to follow suit soon. All the channels have long doubted that TAM has
been manipulating the TRP to keep the ad rates down. With this massive revolt by the channels, it is
near certain that the TRP measurement will have to change or TRP will have to die. Today we look at
the mechanism and controversy behind the TRP.
About TRP
Audience measurement measures how many people are in an audience, usually in relation to radio
listenership and television viewership, but also in relation to newspaper and magazine readership
and, increasingly, web traffic on websites. Sometimes, the term is used as pertaining to practices
which help broadcasters and advertisers determine who is listening rather than just how many
people are listening. In some parts of the world, the resulting relative numbers are referred to as
audience share, while in other places the broader term market share is used. This broader meaning
is also called audience research.
Presently, Television Rating Points (TRPs) are the only way to measure the popularity of a TV channel
in India. It is a tool provided to judge which programmes are viewed the most. This gives us an index
of the choice of the people and also the popularity of a particular channel.
For calculation purpose, a device is attached to the TV set in a few thousand viewers' houses for
judging purpose. These numbers are treated as sample from the overall TV owners in different
geographical and demographic sectors. The entire process is under the ownership of TAM Media.
TAM is a joint venture between Nielsen (India) Private Limited and Kantar Market Research.
Appointed by the Joint Industry stakeholders of ISA (Indian Society of Advertisers), IBF (Indian
Broadcast Foundation) and AAAI (Advertising Agencies Association of India) in 1998, it has since
been the central Industry provider of Media and Consumer Insights to the various stakeholders of
the Indian Media and Entertainment Industry - Advertisers & Marketers, Media Owners, Media
Agencies and the Academia.

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The device installed in the households to measure viewing time is called the People's Meter.

It records the time and the programme that a viewer watches on a particular day.

Then, the average is taken for a 30-day period which gives the viewership status for a
particular channel.

Example If the TRP of a TV program is 5.34, it means that 5.34% of the total audience
(measured) watched the complete program during the duration of measurement.

Criticism

The biggest criticism is that a sample size of just 8,000 homes in a vast country like India,
having population of more than 126 crore, is minuscule and misleading.

Prasar Bharati maintains that the reach of Doordarshan channels is the highest across
terrestrial, cable and digital delivery platforms. However, the 8,000 people meters (devices
that capture viewership data) are placed only in urban centres. This completely ignores the
rural viewers.
o

TAM's currently places its people meters in towns having population base of over
one lakh.

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TestCrackers suggestion to Prasar Bharati We grew up watching Doordarshan


and are very nostalgically attached to it. But then, Doordarshan forgot to grow with
us. TRP or no TRP, Doordarshan is lagging far behind other channels in fact the
quality is worse than what it used to be a decade and half ago. The villagers may be
watching DD for now but they will migrate as soon as they can. The argument that
the objective for Prasar Bharati is to spread information, education and
entertainment to the citizens and not revenue maximisation is irrelevant. You can do
better! DD should become the channel of choice and not a channel of compulsion.

NDTVs Billion Dollar Lawsuit


Enough was really enough for NDTV. So, in July 2012, News broadcaster NDTV sued the countrys
only television audience measurement company TAM India and its global parent firms Nielsen
and Kantar for over a billion dollars in the Supreme Court of New York (the choice of location of
lawsuit was surprising, considering that it involves only Indian entities), accusing TAM of
manipulating ratings in return for bribes to its officials.
NDTV has demanded significant damages, including at least $810 million for fraud, $580 million for
negligence and hundreds of million dollars more for a range of causes.
TAMs ratings give critical input to corporate decisions on the advertising purchases that fund and
sustain the broadcast industry. In its lawsuit, NDTV claims that the small sample size and low
turnover have given rise to rampant corruption, with middlemen willing to fix ratings by
influencing sample homes! NDTV has meticulously recorded how the list of PeopleMeter homes
supposed to be secret was leaked in Bangalore. They have secretly recorded the admission by a
consultant who explained how he was able to successfully bribe viewers in sample homes, as well
as TAM staff, and finally got a PeopleMeter installed at his own residence.
The industry feels that the panel size of just 8000 metres is absolutely ridiculous for a country of
Indias size and heterogeneity. Audiences are growing but TAM shows declining viewers to prevent
ad rates from going up.

This may be because WPP, which owns 50 per cent of TAM, owns 60 per cent of advertising
agencies in India.

The Ministry is watching too

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Not willing to leave the matter entirely in the hands of private broadcasters over this issue which
dictates their contents and overall presentation, the broadcasting ministry has asked the telecom
regulatory authority of India (TRAI) to recommend comprehensive guidelines for TRP rating agencies
with TRAI acting as the accrediting agency.

The ministry has asked TRAI to ensure that the new system should have statistically valid
sample size and both the urban and rural areas should be adequately represented. All the
states should be covered and there should be third party audit of the data.

In the new system, data will be drawn from a bigger sample size and numerous categories
which would more accurately represent the size of Indian TV audience.

The Indian Broadcasting Federation (IBF) the representative body of the industry - has been
working on creating its own industry measurement body, Broadcasting Audience Research Council
(BARC), which will have separate entities installing metres, collecting data and analysing data.

Forty eight vendors have expressed interest, and the IBF hopes to have the system up and
running by March, 2014.

Till then, the industry sources said, broadcasters, who had chosen to unsubscribe from TAM,
and advertisers could work out separate indicators to assess a channels reach and
popularity.

Such is the lack of transparency in the system that even the paid ad slot of Nirmal Baba who is
known to give funny remedies for serious problems (you eat one banana daily to get a job, you run
around your neighbours house to get married) was shown to have really high TRP! One
broadcaster said, It (the flawed system of TRP) would have been funny, but for the fact that it
affects our bottom-line.
Amit Mitra Committee
The Committee set up by the Ministry of Information & Broadcasting to review the TRP
measurement in India submitted its report to the Minister for Information & Broadcasting in 2011.
Among other issues concerning TRPs, the committee was mainly requested to examine the present
system of generation of TRPs and its adverse and negative impact on the content of television
programmes due to competition for higher TRPs. The committee was also requested to examine
whether Government should set up an institutional mechanism through legislation which may either
generate TRP ratings directly or work as an accreditation/standardization body while leaving the
work of generation of TRPs to private players.

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We leave you with the recommendations of this Committee, all of which are logical and should be
implemented

The Committee has recommended constitution of a High Powered Committee within


BARC to guide BARC in the area of research, design and analysis. The representatives of
the committee would be eminent members from different fields. The composition of the
High Powered Committee would include a statistician of national repute, measurement
technology expert, a renowned individual from Civil Society or Judiciary, a demographer,
a sociologist, an economist, a business management expert from one of the IIMs,
nominee of an eminent institution, a leading woman of national stature and three special
invitees from BARC.

The recommendations of the High Powered Committee would be binding on BARC. The
committee further recommends that BARC should consider suitable provisions in their
articles of Association and Memorandum of Articles in this regard.

The Committee has taken a serious view of the small sample size used by the two existing
Rating Agencies in India. The Committee has also observed that the rural areas have
been left out from the current system of TRP measurement. The Committee has
recommended an increase in the sample size from 8000 (Eight Thousand) people meter
homes to 15,000 urban & rural households, over a period of two years, and then to
30,000 (Thirty Thousand) over the next three years covering urban areas, rural areas and
small towns, J&K, North east thereby providing a complete geographical coverage of the
country.

The committee has suggested that broadcasters, advertisers and advertising agencies
should pay a certain percentage of their relevant turnovers to BARC on an annual basis
to fund the expansion of sample size for TRP measurement. The total cost of expansion
of TRP measurement system over 5 years would be around 660 Crores which is
approximately 0.32% per year of the total TV industry size in India. The committee feels
that this level of expenditure should not be very difficult for the industry to meet.

In order to provide a wider coverage of people meters, the Committee has suggested
that efforts should be taken by BARC to reduce the manufacturing cost of People meters

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by exploring innovation and local manufacturing with indigenization to overcome


financial limitations which are hampering the increase in sample size. The committee
further recommends that BARC should work in close association with the Industry and aid
the development of an indigenous market for the manufacturers by ensuring that rating
agencies define the specifications of people meters and guarantee a certain demand. The
committee has recommended that as a long term measure, rating agencies should
consider manufacturing/assembling people meters in India itself to bring down the
cost.

The committee also took note of the fact that people meters attract 50% import duty
which makes them expensive. The committee suggests that as an immediate short term
measure reduction in the import duty should be considered.

The Committee has also expressed concern about the lack of transparency in the
methodology of conducting the TRP measurement. The Committee has recommended
that the selection process of rating agency as well as the TRP measurement process
should be carried out in a credible, transparent and statistically robust manner, which
should be subjected to Financial and Process Audit. The details of these should be
disclosed on the website of BARC by making it available in public domain.

The Committee has recommended that the rating system should be made compatible
with emerging technologies to capture data over different platforms corresponding to
penetration levels of respective platforms in TV viewing population, to ensure a holistic
picture of the viewers preference.

The Committee has recommended that there should not be any cross-holding between
the rating agencies and the broadcasters, advertisers and the advertising agencies to
avoid conflict of interest.

The Committee has recommended that the TRP measurement process should consist of
four stages in which the first stage should be designing of survey and quality control
research, followed by commissioning and establishment survey. The third stage should be
data analysis and report generation followed by Audit. Each one of these stages should

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be separately commissioned to distinct agencies to achieve unbiased and reliable


results.

The Committee has also felt that at present there is a lot of secrecy exercised by the
rating agencies in disclosing the data and methodology used through the process of the
entire rating measurement. The Committee has recommended that the guidelines set out
in the TRAI Report of 2008 on the key eligibility conditions of rating agencies, general
operational, ethical and disclosure norms and standards should be followed.

The Committee has taken cognizance of the fact that TRP announcements at very short
intervals may lead to distortion in broadcasting behavior. The Committee has, therefore,
recommended that the TRP generation and announcement by the rating agencies
particularly for the news channels should be done once a week with the possibility to
increase the periodicity to a fortnight.

The Committee has also recommended that BARC should set up a Complaint Redressal
Mechanism on the lines of the model being followed by Advertising Standards Council of
India (ASCI).

The Committee has recommended that BARC should initiate changes within its Board and
appoint the High Powered Committee by June 2011. The Committee has further
recommended that if BARC fails to do so, it may invoke Government action through
appropriate legislation such as taking over the regulation of TRP measurement either by
asking TRAI to step in or by creating other mechanisms.

Quick Questions
Q. Which TV program in India had the highest ever TRP?
A. The final match of the cricket world cup between India and Sri Lanka was watched by
almost two out of every three cable & satellite viewers in the country, making it one of the
most-watched television events in India ever. According to television viewership rating
agency TAM, the final match garnered the highest rating in the entire tournament, beating
even the viewership of the semi-final match between India and Pakistan. The final match of
the world cup telecast on Star Sports, Star Cricket, and Doordarshan garnered television

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rating point (TRP) of 23.2, against 21, for the semi-final match. The final match was watched
by 135 million viewers across the country in cable & satellite, terrestrial and DTH homes.
Q. If the TRP is to be believed, which sop was the most watched TV serial in India?
A. Kyunki Saas Bhi Kabhi Bahu Thi (for our international audience, it translates to, believe it
or not, Because a mother-in-law was once a daughter-in-law, too) was the longest running
serial on Indian television with 1833 episodes. Kyunki was Asia's most watched serial from
2000 to 2008. It also set records for getting the highest television rating points (TRPs) for
more than eight years. In its eighth year too, it had the TRP of 5.6 and was number 1 across
general entertainment channels. The show was cancelled in November 2008 after a dispute
between the production house and the channel.
TestCracker recommends We should have more such serials here. Kyonki sasur bhi kabhi
damaad tha (Because a father-in-law was once a son-in-law too), Kyonki baap bhi kabhi
bachha tha (Because a father was once a child too), Kyonki daadi bhi kabhi poti thi
(Because a grandmother was once a granddaughter too)why stop doing something which
worked?

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Big Brother is watching you


In one of the most shocking breaches on the privacy of millions on individuals across the world, the
US has shamelessly admitted to spying on the private data - including e-mails, videos, pictures, social
networking details, and connection logs - from the main servers of Microsoft, Google, Yahoo, Apple,
Facebook, Skype and other leading US tech companies. What has surprised India is that the extent of
the secretive National Security Agencys (NSA) surveillance of Indian communication traffic is greater
than its electronic spying efforts in China, Russia and Saudi Arabia! The Guardian newspaper has
acquired top-secret documents about a data mining tool used by the National Security Agency (NSA),
called Boundless Informant, that details and even maps by country the voluminous amount of
information it collects from computer and telephone networks. In March 2013 alone, it harvested a
whopping 97 billion pieces of intelligence from computer networks worldwide. This is an
unprecedented act of spying and calls into question the safety of our private social media tools.
Uncle Sam has become Big Brother and is watching your every online communication. But is it fair,
or is it legal? A question of fascinating analysis, this goes to the very root of the age old question
who controls the internet? Why is it that India is among the top few countries on which the US is
spying? We look into all these questions today.
The PRISM & the Boundless Informant
The PRISM is an N.S.A. data-mining partnership with at least nine huge U.S. Internet companies,
among them Google, Skype, Facebook, Microsoft, Yahoo, and Apple. The Guardian has blown the lid
over this top secret program and the revelations are shocking. The Guardian has also released
details of another N.S.A. data-mining program, called Boundless Informant. This tool appears to
record and analyze where intelligence comes from; it can show on a map the amount of intelligence
the N.S.A. collects from every country in the world. According to the Guardian, this past March, the
N.S.A. collected ninety-seven billion pieces of intelligence from global computer networks; three
billion of those came from within the United States.
This whistleblowing act has left the US intelligence authorities upset. The Prism data was set to be
declassified in 2036, according to red print in the lower right-hand corner of some of the slides. We
all know it now, twenty-three years in advance of the appointed hour!

Iran was the country where the largest amount of intelligence was gathered, says the
newspaper, with more than 14 billion reports in that period, followed by 13.5 billion from
Pakistan.

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Jordan and Egypt are the third and fourth most intensively watched countries.

Though the U.S. administration may justify the focus on these countries because of the
nuclear programme of the former and because many terrorist groups operate from the
territory of the latter, the fact that India clocks in fifth with 6.3 billion pieces of information
collected from the countrys computer and data networks in one month alone is bound to
cause alarm and consternation in New Delhi.
o

Alarmed over the development, the Internet Service Providers Association of India
(ISPAI) now plans to meet Telecom, IT and Law Minister Kapil Sibal to impress upon
him the need to ask companies based out of the U.S. or other countries to have
servers in India so that privacy of users could be protected.

It will also discuss with the National Internet Exchange of India (NIXI), whose role is
to facilitate handing over of domestic Internet traffic between the peering ISP
members rather than using servers in the U.S. or elsewhere.

The companies like Google, Yahoo and Apple have always maintained that the user data is safe with
them. It now appears as if they have been willingly giving access of all their user data to the US
intelligence agencies.

Facebook founder Mark Zuckerberg has stated that Facebook is not a part of the PRISM.
We hadn't even heard of PRISM before yesterday, he said in a post.

Similarly, Google Co-founder and CEO Larry Page wrote on his official blog: First, we have
not joined any program that would give the U.S. government or any other government direct
access to our servers. Indeed, the U.S. government does not have direct access or a 'back
door' to the information stored in our data centres. We had not heard of a program called
PRISM until yesterday.
o

TestCracker wonders Did they both have a little chat before writing their
respective blogs? It is uncanny how they both say the same thing!

The US American intelligence community is spinning over the revelation of the NSAs massive
Internet spy tool PRISM, the most high-profile public leak since WikiLeaks, and is taking action
against those who publicized the top-secret program. President Obama has been defending the spy
work.

You cant have 100 per cent security and also then have 100 per cent privacy and zero
inconvenience, Obama said. He also said that it will be harder to detect threats against the

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U.S. now that the two top-secret tools to target terrorists have been so thoroughly
publicised.

But then, does the US have any right to breach the privacy of the citizens of other countries
in order to protect its own citizens? This question will be discussed by the legal community
for quite some time to come. TestCracker maintains that the internet is the next legal
battleground. Many believe that this time the US has crossed the line between security and
paranoia.

Even al-Qaeda seems offended by this breach of their privacy An al-Qaeda affiliated website on
Saturday warned against using the Internet to discuss issues related to militant activities in three
long articles on what it called Americas greatest and unprecedented scandal of spying on its own
citizens and people in other countries.

Caution Oh brothers, it is a great danger revealing PRISM, the greatest American spying
project, wrote one member, describing the NSA programme that gathers information from
major U.S. Internet companies.

It started with 9/11


In the immediate years after the September 11, 2001, attacks, the government began collecting data
from U.S. telephone companies, looking at whether overseas terror suspects were calling phone
numbers in the U.S. The programme does not allow the government to listen in on calls, but it can
track where a call was placed and how long it lasted. If intelligence officials single out phone
numbers that they want to target for eavesdropping, they must return to court to get approval.
PRISM was launched from the ashes of President George W. Bushs secret program of warrantless
domestic surveillance in 2007, after news media disclosures, lawsuits and the Foreign Intelligence
Surveillance Court forced the president to look for new authority. Congress obliged with the Protect
America Act in 2007 and the FISA Amendments Act of 2008, which immunized private companies
that cooperated voluntarily with U.S. intelligence collection. PRISM recruited its first partner,
Microsoft, and began six years of rapidly growing data collection beneath the surface of a roiling
national debate on surveillance and privacy.
The program may be the first of its kind. The NSA prides itself on stealing secrets and breaking
codes, and it is accustomed to corporate partnerships that help it divert data traffic or sidestep
barriers. But now companies as huge as Google and Facebook seem to be partnering with the NSA
which is a reason for worry.

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Even stranger is the way PRISM collects data. Collection is done directly from the servers of
these U.S. Service Providers: Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype,
YouTube, Apple.
The UK seems to be aping the US in this. Londons Guardian newspaper reported that GCHQ,
Britains equivalent of the NSA, also has been secretly gathering intelligence from the same
internet companies through an operation set up by the NSA.

The Guardian has made public the entire secret presentation related to the PRISM. All the logos
which you are so familiar with can be seen on these slides! And you thought no one read your mails
once you logged out Here are a few Top Secret slides -

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Clearly, the US has taken advantage of the fact that when it comes to the internet, it calls the shots
and most of the popular social media companies are American. What the US has done is expected
but what the so-called global companies have done is a breach of trust. This revelation will be used a
case-study by the advocated of the globalization of internet the US can no longer be trusted as the
sole owner or even co-ordinator of internet. We actually disconnected internet while typing this post
the Big Brother may have seen us write this

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Quick Questions
Q. Why do you keep saying the US controls the internet?
A. The current global governance of the internet is done by Internet Corporation of
Assigned Names and Numbers (ICANN) a company governed by the US Laws, and
accountable to the US government. ICANN is responsible for technical operations of root
and domain names infrastructure; it also acts as a transnational governance institution that
makes global Internet public policies that impact copyright, privacy, and cybersecurity ,
which are sovereign interests of the nations
Q. Who invented World Wide Web?
A. Timothy John "Tim" Berners-Lee, a British computer scientist, is the inventor of the World
Wide Web. He made a proposal for an information management system in March 1989, and
he implemented the first successful communication between a Hypertext Transfer Protocol
(HTTP) client and server via the Internet sometime around mid November.

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RBI fines three banks


The Reserve Bank of India (RBI) today imposed a fine of Rs 5 crore on Axis Bank, Rs 4.5 crore on
HDFC Bank and Rs 1 crore on ICICI Bank for violation of know your customer (KYC) norms and antimoney laundering guidelines after inquiring into charges levelled by Cobrapost an online
investigative portal. The Reserve Bank of India had carried out a scrutiny of books of accounts,
internal control, compliance systems and processes of these three banks at their corporate offices
and some branches during March / April 2013 to investigate into the allegations of contravention of
KYC/AML guidelines against them. RBI further said that a similar scrutiny was being conducted at
corporate offices of 36 other banks and the process of follow up action in respect of these banks is
at different stages of its completion. We look at the KYC & AML norms of India and what went wrong
with these banks.
The KYC Norms
KYC is an acronym for Know your Customer, a term used for customer identification process. It
involves making reasonable efforts to determine true identity and beneficial ownership of accounts,
source of funds, the nature of customers business, reasonableness of operations in the account in
relation to the customers business, which in turn helps the banks to manage their risks prudently.

The objective of the KYC guidelines is to prevent banks being used, intentionally or
unintentionally by criminal elements for money laundering.

KYC has two components - Identity and Address.

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Current Affairs

While identity remains the same, the address may change and hence the banks are
required to periodically update their records.

Banks have been advised to lay down Customer Identification Procedure to be


carried out at different stages i.e. while establishing a banking relationship; carrying
out a financial transaction or when the bank has a doubt about the
authenticity/veracity or the adequacy of the previously obtained customer
identification data.

Reserve Bank of India has issued guidelines to banks under Section 35A of the Banking
Regulation Act, 1949 and Rule 7 of Prevention of Money-Laundering (Maintenance of
Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining
and Time for Furnishing Information and Verification and Maintenance of Records of the
Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries)
Rules, 2005. Any breach thereof or non-compliance shall attract penalties under Banking
Regulation Act.

KYC is applicable to customers of the bank. For the purpose of KYC following are the
Customers of the bank.
o

a person or entity that maintains an account and/or has a business relationship with
the bank;

one on whose behalf the account is maintained (i.e. the beneficial owner);

beneficiaries of transactions conducted by professional intermediaries, such as Stock


Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and

Any person or entity connected with a financial transaction which can pose
significant reputational or other risks to the bank, say, a wire transfer or issue of a
high value demand draft as a single transaction.

Banks have been advised to periodically update the customer identification data based upon
the risk category of the customers.
o

Banks create a customer profile based on details about the customer like
social/financial status, nature of business activity, information about his clients
business and their location, the purpose and reason for opening the account, the
expected origin of the funds to be used within the relationship and details of
occupation/employment, sources of wealth or income, expected monthly
remittance, expected monthly withdrawals etc.

When the transactions in the account are observed not consistent with the profile,
bank may ask for any additional details / documents as required. This is just to

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confirm

that

the

account

is

not

being

used

for

any

Money

Laundering/Terrorist/Criminal activities.

The information collected from the customer for the purpose of opening of account is
treated as confidential and details thereof are not divulged for cross selling or any other
similar purposes.

The Sting operation by Cobra Post was about proving that the leading banks are openly flouting
the KYC norms, especially when it comes to the clients who agree to keep huge amounts in their
branches.
http://www.youtube.com/watch?feature=player_embedded&v=IvZD9FSkfqg#!
Banks monitor KYC data for anti-money laundering (AML) and checks relating to combating the
financing of terrorism (CFT).
Anti-Money Laundering (AML)
Anti-money laundering (AML) is a term mainly used in the financial and legal industries to
describe the legal controls that require financial institutions and other regulated entities to
prevent, detect and report money laundering activities. Anti-money laundering guidelines came
into prominence globally as a result of the formation of the Financial Action Task Force (FATF)
and the promulgation of an international framework of anti-money laundering standards. These
standards began to have more relevance in 2000 and 2001 after FATF began a process to
publicly identify countries that were deficient in their anti-money laundering laws and
international cooperation, a process colloquially known as "name and shame".

The Financial Action Task Force (on Money Laundering) (FATF), also known by its French
name, Groupe d'action financire (GAFI), is an intergovernmental organization founded
in 1989 on the initiative of the G7. The purpose of the FATF is to develop policies to
combat money laundering and terrorism financing.
o

India became a member of FATF in 2010, after years of trying. With its induction
as the 34th member-country of the global body that chalks out policies to
counter financial frauds, India now has access to information on suspicious
financial transactions in Switzerland, China, the U.S. and the U.K. The
development marks a significant step towards tracing the source of terror
financing and black money stashed away in tax havens abroad.

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Current Affairs
Following its inclusion into the select club, India and its tax enforcement
authorities the Financial Intelligence Unit, the Enforcement Directorate, the
Central Economic Intelligence Bureau and the Directorate of Revenue
Intelligence are able to exchange vital information from member-countries
on money laundering and terrorist financing activities.

To name and shame is to "publicly say that a person, group or business has done
something wrong". It is used to discourage some kinds of activity (including anti-social
or criminal) by publishing the names of those involved. Even Income Tax departments do
this in order to make the tax offenders come forward and pay their taxes.
o

Even as the IT giant Wipro was busy announcing its profitable quarterly earnings
in Jaunuary, officials of the Greater Bangalore City Corporation (GBCC) knocked
the doors of the company, accompanied by drum beats and trumpet sound at
their headquarters. Their agenda - collect property tax dues of Rs.19.28 crore by embarrassing the Wipro top executives! It was a very old tactic adopted by
the municipality to "name and shame" defaulters of property tax by visiting
them with a band playing loud music.

Quick Questions
Q. What is the Hawala system and how is it related to money laundering?
A. Hawala, also known as hundi, is an informal value transfer system based on the
performance and honour of a huge network of money brokers, which are primarily located
in the Middle East, North Africa, and the Indian subcontinent. It is basically a parallel or
alternative remittance system that exists or operates outside of, or parallel to traditional
banking or financial channels. In the most basic variant of the hawala system, money is
transferred via a network of hawala brokers, or hawaladars. It is the transfer of money
without actually moving it. In fact, a successful definition of the hawala system that is used is
money transfer without money movement.
Q. What is the USA PATRIOT Act?
A. The USA PATRIOT Act of 2001 is an Act of the U.S. Congress that was signed into law by
President George W. Bush on October 26, 2001. The title of the act is a ten letter bacronym
(USA PATRIOT) that stands for Uniting (and) Strengthening America (by) Providing
Appropriate Tools Required (to) Intercept (and) Obstruct Terrorism Act of 2001. The act, as a
response to the terrorist attacks of September 11th, significantly weakened restrictions on

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law enforcement agencies' gathering of intelligence within the United States; expanded the
Secretary of the Treasurys authority to regulate financial transactions, particularly those
involving foreign individuals and entities; and broadened the discretion of law enforcement
and immigration authorities in detaining and deporting immigrants suspected of terrorismrelated acts. The act also expanded the definition of terrorism to include domestic terrorism,
thus enlarging the number of activities to which the USA PATRIOT Acts expanded law
enforcement powers can be applied.
Q. You mentioned bacronym above. What is it?
A. It is a phrase specially constructed so that an acronym fits an existing word. For example,
the fans of Arthur Conan Doyle have a society called Sherlock Holmes Enthusiastic Readers
League of Criminal Knowledge, or SHERLOCK!

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Chinas Race into Space


As if earth is not enough, China has been making big moves in space too. China has launched three
astronauts into orbit for the country's fifth and longest crewed mission in its expanding space
exploration program. The Shenzhou 10 spaceship and its launcher, a Long March-2F rocket, has
blasted off from the Jiuquan Satellite Launch Center in the Gobi Desert. It will dock with the
Tiangong-1 space module and the crew will transfer supplies to the space lab, which has been in
orbit since September 2011. During the 15-day mission, the crew will master the rendezvous and
docking capabilities that are essential for the operation of a manned space platform. And that is the
big dream of China to have its own manned space station. From its recent launches and the future
plans, it seems to be inching closer to its dream. China started late but is catching up fast. Today
we look at the space program of China and its implications for the rest of the world. Space is one
field where India is also at the forefront and it looks well-positioned to stake its claim in space when
the time comes we look at Indias upcoming missions too. A must-read session!
Chinese Space Program
The space program of the People's Republic of China is directed by the China National Space
Administration (CNSA). Its technological roots can be traced back to the late 1950s, when the
People's Republic began a rudimentary ballistic missile program in response to perceived American
(and, later, Soviet) threats. However, the first Chinese crewed space program only began in earnest
several decades later, when an accelerated program of technological development culminated in
Yang Liwei's successful 2003 flight aboard Shenzhou 5.

This achievement made China the third country to independently send humans into space.

Future plans include a permanent Chinese space station in 2020 and crewed expeditions to
the Moon and Mars.

Human spaceflight (or manned spaceflight or crewed spaceflight) is space travel with humans
aboard spacecraft. When a spacecraft is manned, it can be piloted directly, as opposed to machine
or robotic space probes controlled remotely by humans or through automatic methods on board the
spacecraft.

Humans have been continually present in space for 12 years and 221 days on the
International Space Station.

The first manned spaceflight was launched by the Soviet Union on April 12, 1961 as a part
of the Vostok program, with cosmonaut Yuri Gagarin aboard.

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Currently, only Russia and the People's Republic of China maintain human spaceflight
capability independent of international cooperation. As of 2013, human spaceflights are
only launched by the Soyuz program conducted by the Russian Federal Space Agency and
the Shenzhou program conducted by the China National Space Administration.

The United States lost human spaceflight launch capability upon retirement of the space
shuttle in 2011.

India is making moves too


India is planning its own manned space flight in 2016. The first flight of ISRO's new and powerful
rocket that will be able to carry an Indian to space, is expected to take place by the middle of 2015.
Known as the Geostationary satellite launch vehicle (GSLV) Mark-III, this is the heavy-duty rocket,
which Indian Space Research Organisation (ISRO) will use to send an Indian astronaut to the space.

There is one problem though Indias attempt to develop its own cryogenic engine (called
CE-20) has not been successful so far. The Indian Space Research Organisation is setting up a
Rs.139-crore facility at the Bangalore unit of the Hindustan Aeronautics Ltd. to produce
cryogenic engines and complex components for its GSLV and future rockets and it will be
ready in three years.

India has already sent its craft on the moon (Chandrayaan I) and now wants to land a rover soon
(Chandrayaan II). Also on its radar are missions to Mars & Sun. The Mars mission is supposed to
launch in 2013 itself.
Mars Mission Mangalyaan (Mars Craft)

Launch Date: Nov 2013

Estimated Costs: USD 84 mn

The Mangalyaan mission is a planned Mars orbiter to be launched in November 2013 by ISRO.
The Mangalyaan Mars probe will lift off from ISRO's launch site at Sriharikota, Andhra Pradesh,
using a Polar Satellite Launch Vehicle (PSLV) rocket. It is an unmanned mission.

November 2013 launch is looked at as Mars is closest to Earth at this time, which happens every
26 months. In the near future, there are three "windows of opportunity": in late 2013, 2016 and
2018, and Indian scientists are aiming to be ready for the 2013 opportunity.

If successful, India would become the fourth nation in the world to reach Mars, after Russia, U.S.
and ESA (European Space Agency)

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Mars orbit insertion is planned for September 2014 and would allow the spacecraft to enter a
highly elliptical orbit of 500 km x 80,000 km around Mars

Objectives: to develop the technologies required for design, planning, management and
operations of an interplanetary mission, comprising the following major tasks:
o

Orbit maneuvers to transfer the probe from Earth-centered orbit to heliocentric


trajectory and finally capture into Martian orbit

Development of force models and algorithms for orbit and attitude computations and
analyses

Navigation in all phases

Maintain the probe in all phases of the mission meeting power, communications,
thermal and payload operation requirements.

Incorporate autonomous features to handle contingency situations

Launch and Payload:


o

The November 2013 launch will place Mangalyaan into Earth orbit, then six engine
firings will raise that orbit to one with an apogee of 215,000 km and a perigee of 600 km

The Mars Orbiter will go around the planet once in three days

The journey to Mars is expected to last for around 300 days

A final firing will send Mangalyaan onto an interplanetary trajectory

The 15 kg (33 lb) (earlier 25 kg was planned) scientific payload consists of five
instruments
Mars Exospheric Neutral Composition Analyzer (MENCA)
Methane Sensor For Mars (MSM)
Mars Color Camera (MCC)
Probe For Infrared Spectroscopy for Mars (PRISM)
Lyman-alpha photometer - would measure atomic hydrogen in the Martian
atmosphere.

International Reaction on Mangalyaan: There have been debates in the international forums
where the low human development index of India is cited as the need of focus rather than
expensive space missions. Although, well intentioned, it must be noted that the amount spent
(USD 84 mn) over the project is a small fraction of the GDP of India. Plus, such missions help in
gaining technologies which have work areas much beyond space.

Planned Mars Missions from other countries:


o

Maven (Mars Atmosphere and Volatile EvolutioN) Orbiter by NASA. Nov-Dec 2013

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InSight (Interior Exploration using Seismic Investigations, Geodesy and Heat Transport)
Mars Lander mission by NASA, German Aerospace center, French Space Agency. By
March 2016

ExoMars (Exobiology on Mars) Orbiter, Lander, Rover mission by ESA and Russian
Federal Space agency. By 2016

Mars One Private Spaceflight project led by Bas Lasdorp (Dutch) to establish a human
colony on Mars. By 2022

Quick Questions
Q. What exactly was the Space Shuttle Program of the US mentioned above?
A. The Space Shuttle was a crewed, partially reusable low Earth orbital spacecraft operated
by the U.S. National Aeronautics and Space Administration (NASA). Its official program
name was Space Transportation System, taken from a 1969 plan for a system of reusable
spacecraft of which it was the only item funded for development. The first of four orbital
test flights occurred in 1981, leading to operational flights beginning in 1982. It was used on
a total of 135 missions from 1981 to 2011, launched from the Kennedy Space Center (KSC)
in Florida. Operational missions launched numerous satellites, interplanetary probes, and
the Hubble Space Telescope (HST); conducted science experiments in orbit; and participated
in construction and servicing of the International Space Station.
Four fully operational orbiters were initially built: Columbia, Challenger, Discovery, and
Atlantis. Of these, Challenger and Columbia were lost in mission accidents in 1986 and 2003
respectively, in which a total of fourteen astronauts were killed, including an Indian. A fifth
operational orbiter, Endeavour, was built in 1991 to replace Challenger. The Space Shuttle
was retired from service upon the conclusion of Atlantis' final flight on July 21, 2011.
Q. Who was the Indian killed in the Shuttle accident?
A. Kalpana Chawla was the first Indian woman in space. She first flew on Space Shuttle
Columbia in 1997 as a mission specialist and primary robotic arm operator. In 2003, Chawla
was one of seven crew members killed in the Space Shuttle Columbia disaster.

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Rupee falling free


Desperate attempts by the government and its banks have stopped the Rupee from falling even
lower than its lowest ever level against the dollar. Striking 58.98 per dollar at its weakest, the rupee
had plunged 3.25 percent this week, notching record lows for two consecutive days. The rupee has
dropped in 16 of the last 18 trading sessions and is down 7.9 percent since the start of May. The
currency has been the worst performer in Asia this month. This is really bad news for India, making
the stock market nervous and for good reasons. High inflation has been pinching India for more than
two years. Now, the weakening rupee will make crude oil, fertilisers, medicines and iron ore, which
India imports in large quantities, costlier. We look at the implications of weakening Rupee and the
ways in which it may be strengthened.
What is Weakening?
The terms strengthening and weakening have the same context but refer to the changes in the
Indian Rupee over the period of time being mentioned. A strengthening Rupee is one in which the
Rupee has increased in value compared to US Dollar (or any other currency). This means that the
Rupee now buys more of the US Dollar than it did before. Or, in other words, it becomes cheaper to
import (you will have to pay lesser Rupee for the same Dollars). A weakening Rupee is the opposite
as it means the Rupee has fallen in value compared to the US Dollar - making the Rupee buy less of
the US Dollar. Or, in other words, you earn more if you are a net exporter (you will be billed in US
Dollar and when you convert it to Indian Rupees, you will get more of Rupees than before!).

For example, let us say, you are importing an item worth 100$ and the Rupee strengthens
from 55 Rs per USD to 53 Rs per USD => you will save 100x2 = 200 Rs on your import.

On the other hand, if the Rupee weakens from 55 to 57, you will have to pay 200 Rs more!

Similarly, if you are a net exporter and the Rupee weakens by 2 units, you will be
(effectively) paid Rs 200 more while if it strengthens by 2 units (as above) you will be paid
200 Rs less.
o

Our IT companies, in general are net exporters. What do you think might have
happened to their stock price in these few days when Rupee has weakened to
record lows?

Well, most IT stocks have increased by more than 5% in these 5 days! For
the same earning, if this trend continues, they will make more money (that
is, in Rupees)!

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The weakness in the rupee, as well as a recovering US economy, is


increasing the appeal of IT stocks for investors. Since Indian IT firms get
more than half their revenues from the US, a rise in the dollar translates into
more revenues for them in rupees.

So, why exactly does it weaken? An exchange rate is nothing but a reflection of the supply and
demand situation of one currency vis a vis other. There are multiple factors which affect exchange
rates
(a)Fundamental Reasons
-

Balance of Payment surplus leads to stronger currency.

Economic Growth Rates High/Low growth rate.

Fiscal / Monetary Policy- deficit financing leads to depreciation of currency.

Interest Rates currency with higher interest will appreciate in the short term.

Political Issues Political stability leads to stable rates

(b) Technical Reasons


-

Government Control can lead to unrealistic value.

Free flow of Capital from lower interest rate to higher interest rates.

(c) Speculation higher the speculation higher the volatility in rates

There are several structural reasons for the Rupee's weakness. The origin of the problem lies in the
widening trade and current account deficits. The trade deficit for April was $17.7 billion compared
with $14.04 billion a year earlier. The government is trying to bridge the gap between imports and

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exports but it can do little as measures to boost export competitiveness cannot be implemented
overnight. That requires a sustained focus on manufacturing high-end and sophisticated products.
Simply put, the current weakening of the Rupee can be attributed to a worsening economic
performance by India and an improving economic situation in the US (though far from being
normal). Remember that the Dollar is still the safest currency and in uncertain conditions, most
investors shift to the USD.
India is a net importer (it imports more than it exports) and we know that it becomes more
expensive to import if the Rupee weakens so obviously, the policy makers are worried about the
falling Rupee.
How to arrest Rupees slide?
i

The RBI can sell off dollars to stem the rupee slide. The RBI only intervenes when the forex
volatility goes out of hand. It seems to have instructed the public sector banks to sell dollars
to prevent the Rupee from sliding further this month. Normally, it does not openly declare
that it is selling dollars.

ii

The government can attract more Foreign Funds through FII (portfolio investment) or FDI
(Foreign Direct Investment). This will generate demand for Rupee and strengthen it.

iii The exporters at special economic zones (SEZ) can realise their dollar earnings and get them
back into the country within one year in a bid to increase the supply of dollars in the market.
The long-term solution lies in attracting more permanent capital in the form of foreign direct
investment and in becoming export competitive.

Quick Questions
Q. We often hear that Rupee is partially convertible. What does it mean?
A. The ease with which a country's currency can be converted into another currency is called
covertibility. Convertibility is extremely important for international commerce. Convertibility
is partial in India because there are ceilings on the amount of foreign exchange that can be
purchased by residents or firms registered in the country for acquisition of assets abroad
under FEMA (Foreign Exchange Management Act) Regulations. Under the partial
convertibility of Rupee, dispensation of 40% of the Foreign exchange has to be surrendered
to the Reserve Bank of India at the official rate and balance 60% of the foreign exchange has
to be encashed by the exporters at the market rate (which is greater than the official rate).

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Q. Who invented Rupee?


A. The first "rupee" is believed to have been introduced by Sher Shah Suri (14861545),
based on a ratio of 40 copper pieces (paisa) per rupee.

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Food Security Act the time has come


The government plans to convene a special session of Parliament for passage of the Food Security
Bill as a divided Cabinet rejected the idea of promulgating an ordinance to implement the crucial
legislation. The UPA is desperate to pass this legislation, just in time before the next elections, in the
hope that it will do wonders to its election results, much like MGNREGA did in the last elections. The
opposition is determined to not let the UPA go away with all the credit for this bill. However, the
government has clearly indicated that if the BJP disrupts the debate in the Parliament, it will anyway
promulgate an ordinance. The bill aims to give legal rights to 67 per cent of the population over a
uniform quantity of 5 kg foodgrains at a fixed price of Rs 1-3 per kg through ration shops. If passed, it
will be one of the most powerful social legislations ever passed by the Parliament. Around 800
million people would thus get the subsidised grain, at an initial cost of around Rs.1.3 lakh crore to
the exchequer. Questions have however been raised about the government being able to manage
the funds to push through this scheme. We look at the significance of this bill and the Right to Food.
Right to Food
It is the right to have regular, permanent and unrestricted access, either directly or by means of
financial purchases, to quantitatively and qualitatively adequate and sufficient food corresponding
to the cultural traditions of the people to which the consumer belongs, and which ensure a physical
and mental, individual and collective, fulfilling and dignified life, free of fear. The right to food, and
its variations, is a human right protecting the right for people to feed themselves in dignity. The right
to food protects the right of all human beings to be free from hunger, food insecurity and
malnutrition.

The right is derived from the International Covenant on Economic, Social and Cultural Rights
which has 160 state parties as of May 2012 (including India). States that sign the covenant agree
to take steps to the maximum of their available resources to achieve progressively the full
realization of the right to adequate food, both nationally and internationally.

In a total of 106 countries the right to food is applicable either via constitutional arrangements
of various forms or via direct applicability in law of various international treaties in which the
right to food is protected.

Dimensions of right to food: The Three As


o

Availability refers to the possibilities either for feeding oneself directly from
productive land or other natural resources, or for well functioning distribution,

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processing and market systems that can move food from the site of production to
where it is needed
o

Accessibility implies that economic and physical access to food is to be guaranteed.


On the one hand, economic access means that food should be affordable for an
adequate diet without compromising other basic needs. On the other hand,
physically vulnerable, such as sick, children, disabled or elderly should also have
access to food.

Adequacy implies that that the food must satisfy the dietary needs of every
individual, taking into account age, living conditions, health, occupation, sex, culture
and religion, for example. The food must be safe and adequate protective measures
by both public and private means must be taken to prevent contamination of
foodstuffs through adulteration and/or through bad environmental hygiene or
inappropriate handling at different stages throughout the food chain; care must also
be taken to identify and avoid or destroy naturally occurring toxins.

Indias response to Food security

The National Food Security Bill, 2011, which makes the right to food a legal right, seeks to deliver
food security by providing specific entitlements to certain groups of individuals through the
Targeted Public Distribution System, a large-scale subsidized food grain distribution system.

The Standing Committee on Food, Consumer Affairs and Public Distribution presented its report
on the Food Security Bill on January 17, 2013. It made recommendations on key issues such as
the categorization of beneficiaries, cash transfers and cost sharing between the centre and
states. On the basis of the recommendations, draft of the bill was prepared.

Highlights of the Bill:


o

The Bill proposes foodgrain entitlements for up to 75 percent of the rural and up to 50
percent of the urban population. Of these, at least 46 percent of the rural and 28
percent of the urban population will be designated as priority households. The rest will
be designated as general households.

Priority households will be entitled to 7 kg of subsidised foodgrains per person per


month. General households will be entitled to at least 3 kg.

The central government will determine the percentage of people in each state that will
belong to the priority and general groups. State governments will identify households
that belong to these groups.

The Bill proposes meal entitlements to specific groups. These include: pregnant women
and lactating mothers, children between the ages of six months and 14 years,

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malnourished children, disaster affected persons, and destitute, homeless and starving
persons.
o

Grievance redressal mechanisms will be set up at the district, state, and central levels of
government.

The Bill proposes reforms to the Targeted Public Distribution System.

Reforms in the PDS


The reforms shall, include

Doorstep delivery of foodgrains to the Targeted Public Distribution System outlets

Application of information and communication technology tools including end-to-end


computerisation in order to ensure transparent recording of transactions at all levels, and to
prevent diversion

Leveraging aadhaar for unique identification, with biometric information of entitled


beneficiaries for proper targeting of benefits under this Act

Full transparency of records

Preference to public institutions or public bodies such as Panchayats, self help groups, cooperatives, in licensing of fair price shops and management of fair price shops by women or their
collectives

Diversification of commodities distributed under the Public Distribution System over a period of
time;

Support to local public distribution models and grains banks

Introducing schemes, such as, cash transfer, food coupons, or other schemes, to the targeted
beneficiaries, in such area and manner as may be prescribed by the Central Government

Key Issues / Threats

The Bill classifies beneficiaries into groups. The process of identifying beneficiaries and placing
them into these groups may lead to large inclusion and exclusion errors.

The Bill does not provide a rationale for the cut-off numbers prescribed for entitlements to
priority and general households.

Several entitlements and the grievance redressal structure would require state legislatures to
make adequate budgetary allocations. Implementation of the Bill may be affected if states do
not pass requisite allocations in their budgets or do not possess adequate funds.

The grievance redressal framework may overlap with that provided in the Citizens Charter Bill
that is pending in Parliament.

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Some of the specified goals in the bill (Schedule III) may not be directly related to food security.
It is unclear why these have been included in the Bill.

The Bill provides similar definitions for starving and destitute persons. However, entitlements to
the two groups differ.

Comparison between Standing committees recommendations and draft of the bill

Issue

Standing Committees Recommendations

Who will get food Uniform category: Priority, general and other
categories shall be collapsed into included
security?
and excluded categories. Included category
shall extend to 75% of the rural and 50% of
the urban population.

Food Security Bill


75% of the rural and 50% of the urban population
(to be divided into priority and general
categories). Of these, at least 46% of the rural
and 28% of urban populations will be priority (the
rest will be general).

How will they be The centre should clearly define criteria for The centre shall prescribe guidelines for
exclusion and consult with states to create identifying households; states shall identify the
identified?
inclusion criteria.
specific households.
What will they get?

Included: 5 kg food grains/person/month (at Priority:7 kg food grains/person/month (at Rs


subsidized prices). Pulses, sugar, etc., should 3/kg for wheat, Rs 2/kg for rice, Rs 1/kg for
coarse grains).General: 3 kg food grains/person/
be provided in addition to foodgrains.
month (at 50% of MSP).

Reforms to TPDS

Implement specific IT reforms, for e.g. CCTV Doorstep delivery of food grains to ration shops,
cameras in godowns, use of internet, and GPS use of information technology, etc.
tracking
of
vehicles
carrying
foodgrains. Evaluate implementation of TPDS
every 5 yrs.

Cost-sharing
Finance Commission and states should be Costs will be shared between centre and states.
between centre and consulted regarding additional expenditure to Mechanism for cost-sharing will be determined
states
be borne by states to implement the Bill.
by the centre.
Cash Transfers

Cash transfers should not be introduced at Schemes such as cash transfer and food coupons
this time. Adequate banking infrastructure shall be introduced in lieu of food grains.
needs to be set up before introduction.

Time
limit
for States to be provided reasonable time limit The Act shall come into force on a date specified
i.e., 1 year, after which Act will come into by the centre.
implementation
force.

There is no doubt that India, which is home to the maximum number of hungry people in this world
needs such an enabling social legislation. It is unfortunate that both the government and the

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opposition are using it as vote generating tactic. Whatever be their intentions, this is one bill which
needs to not just be passed, but also rigorously implemented, with zero tolerance towards
corruption and leakages.

Despite steady economic growth and robust social sector spending, Indias performance in
the International Food Policy Research Institutes Global Hunger Index (GHI) in 2012 lagged
behind those of its neighboursPakistan, Sri Lanka and Nepal. India stood 65th in the list of
79 nations.

Quick Questions
Q. What exactly is an ordinance?
A. Under the Constitution, the power to make laws rests with the legislature. However, in
cases when Parliament is not in session, and immediate action is needed, the President can
issue an ordinance. An ordinance is a law, and could introduce legislative changes. The
Supreme Court has clarified that the legislative power to issue ordinances is in the nature of
an emergency power given to the executive only to meet an emergent situation.
For example, the President issued the Criminal Law (Amendment) Ordinance on February 3,
2013. This ordinance amended the Indian Penal Code, Criminal Procedure Code and the
Indian Evidence Act.

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Once the ordinance is laid in Parliament, the government introduces a Bill addressing the
same issue. This Bill is supposed to highlight the reasons that necessitated the issue of the
Ordinance. Thereafter, the Bill follows the regular law making process.
Q. For how long can an ordinance last?
A. There is no such fixed limit. The Constitution says, the ordinance ceases to operate (that
is, expires) six weeks after the assembly of the Parliament. Article 123 deals with this topic.
Below, we reproduce the entire article.
123. Power of President to promulgate Ordinances during recess of Parliament
(1) If at any time, except when both Houses of Parliament are in session, the
President is satisfied that circumstances exist which render it necessary for him to
take immediate action, he may promulgate such Ordinance as the circumstances
appear to him to require
(2) An Ordinance promulgated under this article shall have the same force and effect
as an Act of Parliament, but every such Ordinance
(a) shall be laid before both House of Parliament and shall cease to operate at the
expiration of six weeks from the reassemble of Parliament, or, if before the
expiration of that period resolutions disapproving it are passed by both Houses,
upon the passing of the second of those resolutions; and
(b) may be withdrawn at any time by the President Explanation Where the Houses of
Parliament are summoned to reassemble on different dates, the period of six weeks
shall be reckoned from the later of those dates for the purposes of this clause
(3) If and so far as an Ordinance under this article makes any provision which
Parliament would not under this Constitution be competent to enact, it shall be void

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Current Affairs

The Next President of Iran


Iranians celebrated into Sunday after moderate Hassan Rohani was elected President in a popular
rejection of conservative hardliners, and he pledged to end years of increasing bitterness in Irans
international relations. Rowhani is a former top nuclear negotiator who has championed a more
constructive engagement with world powers. He received a resounding mandate for change from
Iranians tired of years of economic decline under U.N. and Western sanctions and security
clampdowns on dissent. Arch-enemy Israel however wasnt happy it warned against any
complacency on Iran's disputed quest for nuclear power, urging the international community to not
loosen the pressure on Iran for it to stop its nuclear program. Israel believes that it is Iran's
theocratic supreme leader, Ayatollah Ali Khamenei, and not the President who sets nuclear policy.
He is slated to assume office on August 3, 2013, upon the expiration of Ahmadinejad's term. Will he
change the image of Iran when he takes over from the current President? Why is Iran the country
which most countries love to hate?
The Iranian Revolution & the advent of the Supreme Leader
Iran's revolution began with a popular democracy movement and ended with the establishment of
the world's first Islamic state. The revolution turned Iranian society upside down and became one
of the defining moments of the 20th Century.
The Iranian Revolution refers to events involving the overthrow of the Pahlavi dynasty under Shah
Mohammad Reza Pahlavi, who was supported by the United States and United Kingdom, and its
replacement with an Islamic republic under Ayatollah Khomeini, the leader of the revolution.
Before the revolution Iran was ruled by Shah Reza Pahlavi. Power was clustered among a close
network of the Shah's relations and friends. During the 1970s the gap between Iran's rich and poor
grew. Distrust of the Shah's economic policy and resentment of his autocratic style fuelled dissent
against his regime. Opposition voices rallied round Ayatollah Ruhollah Khomeini, a shia cleric living in
exile in Paris. Promising social and economic reform, the ayatollah prescribed a return to traditional
religious values, which struck a chord with many Iranians. As the 1970s drew to a close, a series of
large-scale, increasingly violent anti-Shah protests swept Iran. Instability, including a wave of general
strikes, continued throughout the year, crippling the country's economy.
In January 1979, the Shah left Tehran for an "extended vacation". He was never to return. All over
Iran statues of the Shah were torn down by Khomeini supporters. The Shah left Iran for exile on

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January 16, 1979 as the last Persian monarch and in the resulting power vacuum two weeks later
Ayatollah Khomeini returned to Tehran to a greeting by several million Iranians. The royal reign
collapsed shortly after on February 11 when guerrillas and rebel troops overwhelmed troops loyal to
the Shah in armed street fighting. Revolutionaries stormed Tehran's main radio station and declared:
"This is the voice of the revolution of the Iranian people!"

Iran voted by national referendum to become an Islamic Republic on April 1, 1979, and to approve a
new democratic-theocratic hybrid constitution whereby Khomeini became Supreme Leader of the
country, in December 1979.

The revolution was unusual for the surprise it created throughout the world: it lacked many
of the customary causes of revolution (defeat at war, a financial crisis, peasant rebellion, or
disgruntled military), produced profound change at great speed, was massively popular, and
replaced a West-oriented autocratic monarchy with a theocracy based on Guardianship of
the Islamic Jurists (or velayat-e faqih).

Hassan Rouhani who is he?

Rowhani , a midranking cleric, is not a reformist even by Iranian standards. He backed a violent
crackdown against the pro-democracy student movement in 1999. A politician since the 1979

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revolution, he has served as a Member of Parliament and speaker of National Security Council. In the
1990s, he completed a doctorate at Scotland's Glasgow Caledonian University.
But during the campaign, he presented himself as a moderate, both on domestic and foreign policy,
and appeared as the most charismatic and pragmatic of all the eight candidates five of them
ardent supporters of Khamenei. He appealed to the young electorate that is vying for more political
and social openness. In his campaigning, Rouhani also pledged to improve the economy and
unemployment, and as a former nuclear negotiator, he said he would reduce the high tension
between Iran and the outside world by addressing sanctions related to Iran's nuclear program.

The surge of support for him came after Mohammad Reza Aref, the only reformist candidate
in the race, announced on Tuesday that he was withdrawing on the advice of pro-reform exPresident Mohammad Khatami.

Rouhani thus went into polling day with the endorsement of two ex-presidents - Mr Khatami
and Akbar Hashemi Rafsanjani, who was disqualified from the race by the powerful Guardian
Council, a 12-member body of theologians and jurists.

In the end, Rouhani won 18,613,329 of the 36,704,156 votes cast. This represented 50.71% of the
vote, giving him enough to avoid a run-off.

"This victory is the victory of wisdom, moderation, growth and awareness, the victory of
commitment and religiosity over extremism and ill tempers," Rouhani said in his victory
speech.

Israel thinks he is just a fake moderate phase and will serve as a puppet in the hands of the
Supreme Leader and therefore there should not be any let up in the sanctions against Iran.

Rouhani is said to be fluent in English, German, French, Russian and Arabic.


o

TestCracker thinks, with such a diversified linguistic ability, he should be able to


negotiate better with all the world powers

Sanctions against Iran


Numerous governments and multinational entities have imposed sanctions against Iran, which are
commonly used to bar nuclear and military exports to the country. The United States originally
imposed sanctions against Iran following the Iranian Revolution of 1979, expanded them to include
firms dealing with the Iranian regime in 1995.
In 2006, the UN Security Council passed Resolution 1696 and imposed sanctions after Iran refused
to suspend its enrichment program. U.S. sanctions initially targeted investments in oil, gas and

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petrochemicals, exports of refined petroleum products, and business dealings with the Iranian
Republican Guard Corps. This encompasses banking and insurance transactions (including with the
Central Bank of Iran), shipping, web-hosting services for commercial endeavors, and domain name
registration services.

After the Iranian Revolution in 1979, the United States ended its economic and diplomatic
ties with Iran, banned Iranian oil imports and froze approximately $11 billion of its assets.

In recent years, billions of dollars of Iranian assets abroad have been seized or frozen,
including a building in New York City, and bank accounts in Great Britain, Luxembourg, Japan
and Canada

Over the years, sanctions have taken a serious toll on Iran's economy and people. Since
1979, the United States has led international efforts to use sanctions to influence Iran's
policies, including Iran's uranium enrichment program, which Western governments fear is
intended for developing the capability to produce nuclear weapons.

Iran counters that its nuclear program is for medical purposes, as well as generating
electricity. Since nuclear talks between Iran and Western governments have largely failed,
new proposals to enforce stronger economic sanctions on Iran are currently being discussed.

The Economy of Iran


So how does a sanction ridden economy look like? As you may expect, largely driven by the public
sector.
The economy of Iran is a mixed and transition economy with a large public sector. Some 50% of the
economy is centrally planned. It is dominated by oil and gas production, although over 40 industries
are directly involved in the Tehran Stock Exchange.

It is the world's seventeenth largest economy by purchasing power parity (PPP) and twentyfifth by nominal gross domestic product.

A unique feature of Iran's economy is the presence of large religious foundations, whose
combined budgets represent more than 30% of central government spending.

Very interestingly, due to its relative isolation from global financial markets, Iran was initially
able to avoid recession in the aftermath of the 2008 global financial crisis!

Most of the country's exports are oil and gas, accounting for a majority of government
revenue. Oil export revenues enabled Iran to amass well over $100 billion in foreign
exchange reserves as of 2010. Due to increasingly stringent sanctions imposed by the

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international community as a result of the country's nuclear program, oil exports fell by half,
allowing Iraqi oil exports to overtake Iran's for the first time since the 1980s.

Iran's educated population, constrained economy and insufficient foreign and domestic
investment prompted an increasing number of Iranians to seek overseas employment,
resulting in a significant "brain drain".

Iran has held observer status at the World Trade Organization (WTO) since 2005. Although
the United States has consistently blocked its bid to join the organization, observer status
came in a goodwill gesture to ease nuclear negotiations between Iran and the international
community.

Quick Questions
Q. Why did Mahmoud Ahmadinejad not contest the elections?
A. Good question the fiery President was not one of the contestants this time. The reason
obviously has to be Constitutional (yes, Iran has one). The President of Iran is elected for a
four-year term by the direct vote of the people and may not serve for more than two
consecutive terms or more than 8 years. This is Ahmadinejads second and last term.
Q. What has poor Ahmadinejad done to invite such flak?
A. Ahmadinejad is a controversial figure both within Iran and internationally. He has been
criticized domestically for his economic lapses and disregard for human rights.
Internationally he is criticized for his hostility towards some countries, most notably Israel,
the United Kingdom, and the United States. In 2007, Ahmadinejad introduced a gas rationing
plan to reduce the country's fuel consumption, and cut the interest rates that private and
public banking facilities could charge. He explicitly supports Iran's nuclear program. His
election to a second term in 2009 was widely disputed and caused widespread protests
domestically and drew significant international criticism.
Q. What was Ahmadinejad doing before he became the President of Iran?
A. He was a teacher. In fact he has said that he will go back to teaching once his Presidency
is over! In 1976, Ahmadinejad took Iran's national university entrance contests. According to
his autobiography, he was ranked 132nd out of 400,000 participants that year and soon
enrolled in the Iran University of Science and Technology (IUST) as an undergraduate
student of civil engineering. He earned his PhD (1997) in transportation engineering and
planning from Iran University of Science and Technology, located at Tehran.

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TestCracker must say, however controversial this may sound, that a teacher becoming the
President and returning to teaching.sounds like a life well lived!

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RBI does not cut rates


The cash reserve ratio (CRR) of scheduled banks remains unchanged at 4.0 per cent of their net
demand and time liabilities; the repo rate under the liquidity adjustment facility (LAF) remains
unchanged at 7.25 per cent. Consequently, the reverse repo rate under the LAF will remain
unchanged at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.25
per cent. Basically, nothing changes. The RBI has decided to wait and watch before making any rate
cut, in spite of inflation (WPI) coming down to what it had earlier deemed to be its comfort level.
According to the RBI, this monetary policy stance has been informed by the evolving growthinflation dynamic, the balance of risks as well as recent developments in the external sector. Each
policy review (and there are eight in a year by the way!) becomes a good opportunity to revisit the
recent trends in Indian Economy. Today we revisit the same.
The recent trend is not good
This is what the RBI has to say On the domestic front, macroeconomic conditions remain weak,
hamstrung by infrastructure bottlenecks, supply constraints, lacklustre domestic demand and
subdued investment sentiment. Inflation has moderated as projected. However, upside pressures on
the way forward from the pass-through of rupee depreciation, recent increases in administered
prices and persisting imbalances, especially relating to food, pose risks of second-round effects. As
recent experience has shown, shifts in global market sentiment can trigger sudden stop and reversal
of capital from a broad swath of emerging economies, swiftly amplifying risks to the outlook. India is
not an exception.

A second-round effect means when trade unions decide to raise wages after commodity
prices (e.g. energy, food) have increased sharply. This leads to a high inflation, so the
central bank has to raise interest rates. This is the effect of inflationary expectation.

Inflationary expectation is the rate of inflation that workers, businesses and investors think
will prevail in the future, and that they will therefore factor into their decision-making. For
example, if the union thinks that the inflation has been high for the past one year and
therefore it will be high for a year more, it will negotiate for a much higher wage increase
than before. Now if the workers get higher wages, they will spend more. This will again put
more money in the market chasing the same number of goods. Higher demand and the
same level of supplies will eventually result in higher price levels. Even the producers will

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increase the prices because they know that they may have to pay higher wages in the
coming time!
o

Inflationary expectations play a role because if workers and employers expect


inflation to persist in the future, they will increase their (nominal) wages and prices
now. This means that inflation happens now simply because of subjective views
about what may happen in the future! We tell you, economics is fascinating.

The Indian currency looks highly vulnerable today (we covered this issue in "the slide of rupee" .
The trade deficit for the country is close to $20 billion per month and the overall current account
deficit (CAD) is expected to be close to 5-6% of GDP in the best case. Exports have been
consistently falling in the last few months while the import bill had shot up significantly,
especially oil and gold imports.

The external sector is vulnerable with all the major economies slowing down (no good
news from the Euro zone) and this will have impact on both the exports and capital
flows into the country. India is also seeing a major slowdown in growth with the latest
annual GDP growth figure coming down to as low as 5% (annual, 2012-13). The
combination of a high fiscal deficit combined with a high trade deficit is a recipe for
disaster.

In such a situation, the RBI cannot afford to relax the interest rates and risk higher
inflation.

The Highlights of the RBI Monetary Policy Review of June 17, 2013
Key short term lending rate (repo rate) kept unchanged at 7.25 per cent

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Cash reserve ratio too unchanged at 4 per cent


Continuing weakness in manufacturing needs to be urgently reversed (latest Index of
Industrial Production growth rate is 2.3%, for April)
Rupee fall, external sector risks and elevated food inflation are areas of concern
The RBI asks the government to create conducive environment for private investment,
improve project clearances to promote growth
Reducing CAD is a challenge (read "the deficit disaster" to know how bad CAD can be!); RBI
pitches for stable foreign inflows to finance it
Steps to curb gold imports, easing commodity prices to lower CAD in 2013-14
Balance of Payments, inflation and growth rate to determine future monetary stance
Need to be vigilant about global uncertainty and its impact on capital flows
The RBI ready to use all available instruments to deal with any adverse development in
external sector
Positive rating action should have favourable impact on investor confidence
Next review (for the entire first quarter) of policy on July 30.

Quick Questions
Q. Can we have negative inflation?
A. Of course we can have negative inflation. Nothing stops the general level of prices from
dropping to lowers levels than that of the comparable period a year ago!
Q. Should we have negative inflation?
A. You will be happy, wont you? You will get everything so cheap. But it is not desirable. It is
undesirable because of two reasons first, the producers know that the price will keep
dropping so they will not produce as much as they can (why should they produce more to
sell at lower prices in the future!) and second, even you will not buy now, because you will
know that the prices will come down even more in the coming days! So it will be bad for the
overall health of the economy producers not producing and the consumers not consuming.
This is what has been happening in Japan, which has now had years of near-zero inflation.
The new PM of Japan (Shinzo Abe) has a target of 2% inflation they may want to borrow
some from India

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Afghanistan without the US


Hamid Karzai, the President of Afghanistan, has announced that Afghan forces have taken over the
lead from the U.S. led NATO coalition comes as Afghans show increasing signs of confidence in their
ability to defend their nation. Karzai's announcement included news that Afghanistan will send
representatives to the Gulf state of Qatar to talk peace with the Taliban after 12 years of war. The
announcement is historic and the developments will be keenly watched by the world what
happens in Afghanistan determines what happens to the rest of the world in terms of security. A
safe and secure Afghanistan is needed by the world to not worry about increased terrorist attacks. In
the recent past, Afghan forces have not proved their mettle in fact, Taliban may find it convenient
to infiltrate or manipulate the local security forces. This official hand-over of responsibility means
NATO will move to a supporting role in preparation for complete withdrawal in 18 months in 2014.
For India, this may turn into a nightmare situation because Pakistan will try to take good advantage
of the emerging situation. India has been helping Afghanistan to reconstruct its infrastructure,
earning it a lot of goodwill in the country. What has been happening in Afghanistan so far? Will
Afghanistan become the virtual battleground for India & Pakistan?
The Never Ending War
The War in Afghanistan began on 7 October 2001, when the armed forces of the United States, the
United Kingdom, Australia, France, and the Afghan United Front (Northern Alliance) launched
Operation Enduring Freedom. The U.S. organized the operation in response to the terrorist attacks
of September 11 in the United States. The objective of the invasion was to dismantle the Al Qaeda
organization and end its use of Afghanistan as a base. The U.S. also intended to remove the
fundamentalist Taliban regime from power in Afghanistan. The Taliban protected Al Qaeda and had
refused to arrest Osama bin Laden for his ordering of the September 11 terrorist attacks.

The International Security Assistance Force (ISAF) is a NATO-led security mission in


Afghanistan that was established by the United Nations Security Council in December 2001
by Resolution 1386
On May 21, 2012 the leaders of the NATO-member countries endorsed an exit strategy
during the 2012 NATO Summit in Chicago. The NATO-led ISAF Forces will hand over
command of all combat missions to Afghan forces by the middle of 2013, while shifting at
the same time from combat to a support role of advising, training and assisting the Afghan

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security forces and then withdraw most of the 130,000 foreign troops by the end of
December 2014
o

NATO to train 3.5 Lakh Afghan soldiers by 2014

The US spends 100b $ on Afghanistan every year more than 6 times the GDP of
Afghanistan!

India & Afghanistan


Bilateral relations between the Islamic Republic of Afghanistan and the Republic of India have been
traditionally strong and friendly. While the Republic of India was the only South Asian country to
recognize the Soviet-backed Democratic Republic of Afghanistan in the 1980s, its relations were
diminished during the 1990s Afghan civil war and the Taliban government. India aided the overthrow
of the Taliban and became the largest regional provider of humanitarian and reconstruction aid to
Afghanistan. Indians are working in various construction projects, as part of India's rebuilding efforts
in Afghanistan.
Afghanistan and India have had a long shared history going back over millennia. The two countries
are natural strategic partners by virtue of geography and a common vision of peace and cooperation
in the region. The two countries have built up extensive, mutually beneficial relations in all fields.

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The strong ties have been manifested in recent times in the form of a robust Strategic Partnership
Agreement signed between the two countries in October 2011.
The President of Afghanistan visited India in November 2012.

The two sides signed the following documents during the visit:
i

Memorandum of Understanding on Small Development Projects (SDPs) up to US $


100 million;

ii

Memorandum of Understanding on Cooperation in the Field of development of Coal


Mineral Resources;

iii Memorandum of Understanding on Cooperation in the field of Fertilizer;


iv Memorandum of Understanding for Cooperation in Youth Affairs.
India made efforts at encouraging investment in Afghanistan through the Delhi Investment
Summit on Afghanistan, held in Delhi on June 28, 2012. The Delhi Investment Summit
helped attract regional and international attention towards investment in Afghanistan and
its potential in providing economic development and stability to Afghanistan during the
transition period.
India's assistance programmes in Afghanistan, amounting to around US$ 2 billion, including
major projects such as the Salma Dam, the construction of a Parliament building etc., and
small development projects have been appreciated by the Government and people of
Afghanistan
o

India provides more foreign aid to Afghanistan than to any other country. It is
Afghanistans fifth-most significant source of development assistance and its largest
South Asian donor

On-going projects in Afghanistan include reconstruction of Salma Dam (42 MW) in


Herat province; two substations at Doshi and Charikar; construction of the Afghan
Parliament; restoration of Stor Palace; provision of medical services and medicines
through Indian Medical Missions; donation of 1 million tonnes of wheat, both as
grain and in the form of high protein biscuits; assistance for the Indira Gandhi
International Children's Hospital in Kabul; upgrading an Agricultural University;
establishing an Institute of Mining; and supply of buses, computers and other
requirements.

Education and capacity building continue to be an important area of India's


development partnership with Afghanistan. Capacity building programmes being
implemented include university scholarships for Afghan nationals (organized by
ICCR); 674 Indian Council for Agricultural Research (ICAR) scholarships, 593 short-

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term training courses for civilian and defence personnel and deputation of 30 Indian
civil servants under Capacity for Afghan Public Administration (CAP) programme.
o

The proposed Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline (TAPI


pipeline project) made further progress during 2012 with the signing of Gas Sales
and Purchase Agreement with Turkmenistan in May 2012.

The Trans-Afghanistan Pipeline (also known as TurkmenistanAfghanistan


PakistanIndia Pipeline, TAP or TAPI) is a proposed natural gas pipeline
being developed by the Asian Development Bank. The pipeline will transport
Caspian Sea natural gas from Turkmenistan through Afghanistan into
Pakistan and then to India. The Afghan government is expected to receive
8% of the project's revenue.

The proposed 1,000-mile, $7.6 billion Turkmenistan-Afghanistan-PakistanIndia (TAPI) pipeline would carry 33 billion cubic meters per year (bcm/y) of
Turkmen gas, generating a much-needed $1.4 billion per year in transit fees
for Afghanistan. India and Pakistan would receive 14 bcm/y each,
representing 1.5 percent of Indias total annual energy consumption and
15 percent of Pakistans. The transport of Central Asian energy resources to
both India and Pakistan requires stability in Afghanistan, whose territory the
TAPI pipeline must cross, giving both countries strong incentives to promote
security there

India, Pakistan & Afghanistan


India and Pakistan are both keen to influence developments in Afghanistan, both to advance their
own geopolitical, defence, and economic interests and to prevent the other from gaining any
advantage. Their competition, however, complicates efforts to place Afghanistan on a sustainable
path toward political stability, economic growth, and regional integration.

India and Pakistan have different goals for Afghanistan, and they thus undertake very
different activities there. India has striven to strengthen the government in Kabul and
integrate Afghanistan into wider regional political and economic structures. By
strengthening Afghanistan, India advances its own national security objectivesnamely,
eliminating a critical safe haven for terrorists who have attacked India and continue plotting
to do so in the future, and gaining access to Central Asian trade and energy resources. The

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governments overall policy is geared primarily to advancing Indias broader domestic and
regional interests independently of its rivalry with Pakistan.

In contrast, Pakistans goals for Afghanistan are mainlyalthough not exclusivelyIndiacentric and focus primarily on undermining Delhis influence in Afghanistan. Islamabad seeks
a weak Kabul government dominated by a supportive Taliban so that Pakistan can maintain
strategic depth against an Indian invasion, guarantee safe haven for Islamist proxies that it
supports, and prevent India from projecting power in South Asia. Part of the reason for this
strategic orientation is the preeminent decision making role played by Pakistans military,
which emphasizes security matters over virtually all other elements of foreign policy. So long
as India is viewed as an existential threat, and so long as the military plays a central role in
setting Pakistani policy, it is unlikely that there will be a fundamental shift in this policy bias.

Quick Questions
Q. Which three countries had officially recognized the government of Taliban in Afghanistan
(between 1996 & 2001)?
A. Our dear neighbour Pakistan, Saudi Arabia & UAE.
Q. When and why was NATO Formed?
A. The North Atlantic Treaty Organization is an intergovernmental military alliance based on
the North Atlantic Treaty which was signed on 4 April 1949. The organization constitutes a
system of collective defence whereby its member states agree to mutual defense in
response to an attack by any external party. It was established due to the fears of the
leaders of Western Europe (at that time Eastern Europe was under Soviet Russia) after the
Second World War that Russia may take over the whole of Europe! The first NATO Secretary
General, Lord Ismay, stated in 1949 that the organization's goal was "to keep the Russians
out, the Americans in, and the Germans down."
The Treaty of Brussels, signed on 17 March 1948 by Belgium, the Netherlands, Luxembourg,
France, and the United Kingdom, is considered the precursor to the NATO agreement. The
treaty and the Soviet Berlin Blockade led to the creation of the Western European Union's
Defence Organization in September 1948. However, participation of the United States was
thought necessary both to counter the military power of the USSR and to prevent the revival
of nationalist militarism, so talks for a new military alliance began almost immediately
resulting in the North Atlantic Treaty, which was signed in Washington, D.C. on 4 April 1949.

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Flash Floods in North India

Rescue operations are on in full swing in India's flood-hit northern states, where 150 people are now
known to have died. The toll could go much higher as the process of recovery of bodies has not yet
started in many places that are marooned. Early monsoon rains have swollen the Ganges, swept
away houses and left tens of thousands stranded. Many of those stranded are pilgrims to the Char
Dhams - Badrinath, Kedarnath, Gangotri and Yamunotri. The epicentre of the disaster appeared to
be Kedarnath, where the 8th century temple to Lord Shiva was covered under 6 feet of sludge. That
Shiva is considered to be the Hindu god of destruction seems apt now for the villages around the
temple are now completely washed away. The temple has survived though. The rains used to come
in July this time the monsoons struck a month early and the showers have been heavier than usual.
The mystery of the mechanism of monsoons remains unsolved. Today we look into the phenomenon
of flash floods and cloudbursts and also get a glimpse of the worst natural disasters of India.
Flash Flood
A flash flood is a rapid flooding of geomorphic low-lying areas: washes, rivers, dry lakes and basins. It
may be caused by heavy rain associated with a severe thunderstorm, hurricane, tropical storm, or

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meltwater from ice or snow flowing over ice sheets or snowfields. Flash floods may occur after the
collapse of a natural ice or debris dam, or a human structure such as a man-made dam.

Flash floods are distinguished from a regular flood by a timescale of less than six hours.

The temporary availability of water is often utilized by foliage with rapid germination and
short growth cycle, and by specially adapted animal life.

Flash floods can occur under several types of conditions. Flash flooding occurs when precipitation
falls rapidly on saturated soil or dry soil that has poor absorption ability. The runoff collects in
gullies and streams and, as they join to form larger volumes, often forms a fast flowing front of
water and debris.

Flash floods most often occur in normally dry areas that have recently received
precipitation, but may be seen anywhere downstream from the source of the precipitation,
even many miles from the source.

In areas on or near volcanoes, flash floods have also occurred after eruptions, when glaciers
have been melted by the intense heat.

Flash flooding can also be caused by extensive rainfall released by hurricanes and other
tropical storms, as well as the sudden thawing effect of ice dams.

Human activities can also cause flash floods to occur. When dams, constructed for hydroelectricity, have failed, large quantities of water can be released and can destroy everything
within its path.
o

It is being alleged that these flash floods in Uttarakhand were man-made, stemming
from the rampant construction activities.

In deserts, flash floods can be particularly deadly for several reasons. First, storms in arid
regions are infrequent, but they can deliver an enormous amount of water in a very short
time. Second, these rains often fall on poorly-absorbent and often clay-like soil, which
greatly increase the amount of runoff that rivers and other water channels have to handle.
These regions tend not to have the infrastructure that wetter regions have to divert water
from structures and roads, such as storm drains, culverts, and retention basins, either
because of sparse population, poverty, or because residents believe the risk by flash floods is
not high enough to justify the expense.
o

As a rule of thumb, if the soil is less water absorbent, the damage caused by flash
floods in high.

Cloudburst

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A cloudburst is an extreme amount of precipitation, sometimes with hail and thunder, which
normally lasts no longer than a few minutes but is capable of creating flood conditions. In the
Indian subcontinent, a cloudburst usually occurs when a pregnant monsoon cloud drifts northwards,
from the Bay of Bengal or Arabian Sea across the plains, then onto the Himalaya and bursts, bringing
rainfall as high as 100 millimeters per hour.
o

Meteorologists say the rain fall rate equal to or greater than 100 mm per hour is a
cloudburst. The associated convective cloud, can extend up to a height of 15 km above the
ground.

During a cloudburst, more than 20 mm of rain may fall in a few minutes.

When there are instances of cloudbursts, the results can be disastrous. As we have seen
above, cloudburst is one of the causes for Flash Flood.

The Shrine of Shiva


Kedarnath Temple is one of the holiest Hindu temples dedicated to Lord Shiva and is located atop
the Garhwal Himalayan range near the Mandakini river in Kedarnath, Uttarakhand. Due to extreme
weather conditions, the temple is open only between the end of April to Kartik Purnima (the autumn
full moon). In this region Lord Shiva is worshipped as Kedarnath, the 'Lord of Kedar Khand', the
historical name of the region. The temple is not directly accessible by road and has to be reached by
a 14 kilometres uphill trek from Gaurikund.
o

The temple is believed to have been built by Adi Sankaracharya and is one of the twelve
Jyotirlingas, the holiest Hindu shrines of Shiva.

The older temple existed from the times of Mahabharata, when the Pandavas are supposed
to have pleased Shiva by doing penance in Kedarnath.

The temple is also one of the four major sites in India's Chota Char Dham pilgrimage of
Northern Himalayas.

The current flash floods have nearly destroyed the town of Kedarnath. The shrine of Shiva, visited by
Hindu pilgrims from across the world, however, was only partly damaged amid the death and
destruction flash floods, cloudbursts and landslides caused in various parts of Uttarakhand.
Kedarnath Temple is believed to be the seat of Lord Shiva, the Hindu god of destruction. Now the
temple is left with destruction all around it. Last year, half a million people visited Kedarnath
Temple, according to the official website. The shrine closes in the winter, when access is blocked by
snow. It reopens in April or May depending on the phase of the moon. Inside, the walls of the
temple are decorated with figures of Hindu deities and scenes from Hindu mythology.

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Indias worst natural disasters


I.

1737 cyclone in Kolkata ( No of deaths Around 3 lakh)


A cyclone had hit Kolkata in October 1737. The cyclone has been considered the worst one in

the history of India. Around 3 lakh people died in the cyclone according to the reports in various
journals. The figure of casualties however is heavily debated experts say that it would not have
been possible for 3 lakh people to die in Calcutta around that time because the population of
Calcutta was 10,000!
II.

Coringa cyclone, 1893 (No of deaths Around 3 lakh)


On November 16, 1839, a disastrous cyclone struck east India with terrible winds and a giant

storm surge. More than 300,000 people died. Prior to this, a cyclone had hit Coringa in 1789,
resulting in 20,000 deaths. Coringa is a tiny village of the East Godavari district, in Andhra
Pradesh, India.
III.

Bengal Famine, 1943 ( No of deaths 15 lakh to 40 lakh)


The Bengal famine of 1943 struck the Bengal province of pre-partition British India during World

War II following the Japanese occupation of Burma. Estimates are that between 15 lakh to 40
lakh people died of starvation, malnutrition and disease. As in previous Bengal famines,[2] the
highest mortality was not in previously very poor groups, but among artisans and small traders
whose income vanished when people spent all they had on food and did not employ cobblers,
carpenters, etc. It is one of the most tragic events of India and in many ways it was related to the
callous approach of the British India government towards the people of India. This forgotten
holocaust committed by British imperialism was caused by the diversion of shipping normally
used to bring food to Bengal. The shipping was used instead to bring military supplies to the
British army in North Africa in 1942. The photographs of the tragedy are chilling.

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Latur Earthquake, 1993 (No of deaths 20,000)


The earthquake struck India on September 30, 1993. Major destruction was caused in

Maharashtra where 20,000 people died and 30,000 people were severely injured. Around 53
villages were destroyed in the earthquake.
V.

Gujarat earthquake, 2001 (No of deaths 20,000)


The earthquake struck Gujarat on January 26, 2001 when the entire country was celebrating

Republic Day. The quake struck at around 6 am and measured 7.7 on the Richter scale. With
20,000 deaths, 1,67,000 people were severely injured while 6 lakh people lost their homes.
VI.

Tsunami, 2004 (No of deaths 10,136)


The Tsunami had hit India on December 26, 2004. The reason for the Tsunami was an

earthquake, which measured 9 on the Richter scale. However, the epicenter of the earthquake
was an island in Indonesia but it caused maximum loss of property and life in Andaman and
Nicobar Island. Over 10,000 people died and 5,832 went missing. Around 7,000 people died in
Andaman and Nicobar Island alone.

Quick Questions
Q. So Kedarnath is one of the chota chaar dhams (four small pilgrimage sites) which are the other
three?
A. The others are Badarinath, where Lord Vishnu is believed to reside; Gangotri, built in the
early 18th century; and Yamunotri at the source of the Yamuna river.

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Q. Which agency in India is supposed to prevent and mitigate disasters in India?


A. By the enactment of the Disaster Management Act 2005 (DMA), government of India
ordered the creation of the National Disaster Management Authority (NDMA) as opposed
to creating a separate ministry recommended by the Pant committee. The importance that
the government gave to this newly created body can be adjudged by the fact that the NDMA
is chaired by the Prime Minister himself, with a Vice Chairman of the status of Cabinet
Minister and 8 members of the status of Ministers of State. The Vice Chairman and the
members are charged with the responsibility of running the day to day functions of the
NDMA.
The salient features of the DMA were that it was a proactive, holistic and integrated
approach as opposed to a reactive one. It had the legal authority to respond and take action
as demanded by the situation and was backed by an institutional framework. And, last but
not the least, it had what its predecessor organisations did not have viz. financial support by
the creation of a Response Fund and a Mitigation Fund.

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Pay through RuPay


The RBI-backed payment network, RuPay, which is Indias answer to the international payment
gateways MasterCard and Visa, has been rolled out for e-commerce use by the National Payments
Corporation of India (NPCI). The NPCI has charted out a three year growth plan to expand base of its
newly launched first-ever indigenous payment gateway. It is also planning to more than treble the
issuance of the RuPay cards to over 10 million by the end of FY14. Within two years of launch, the
NPCI has issued over 3 million RuPay cards as of end March. RuPay is gaining in acceptance
gradually. Many e-commerce portals are already starting to accept RuPay paymentsthe Future
Groups online venture, for instance, currently provides a RuPay option. Being universally present on
all the e-payment gateways in the e-commerce space is the last hurdle in the way of India's only
homegrown plastic money solution. What was the reason behind launching RuPay and can it
compete with the multinational biggies MasterCard & Visa? Lets discuss.
About RuPay
RuPay is the Indian domestic card payment network set up by National Payments Corporation of
India (NPCI) at the behest of banks in India. This project had been conceived by Indian Banks
Association and has the approval of Reserve Bank of India. The objectives to be fulfilled are:
Reduce overall transaction cost for the banks in India by introducing competition to
international card schemes.
Develop products appropriate for the country particularly for financial inclusion.
Provide card payment service option to many banks who are currently not eligible for card
issuance under the eligibility criteria of international card schemes.
Build environment whereby payment information of the country remains within the country
Shift Personal Consumption Expenditure (PCE) from cash to electronic payments in a
growing economy with a population of 1.2 billion
The most important aim of RuPay is to encourage more debit card usage in the country, especially in
semi-urban and rural areas. For banks, the biggest advantage of signing up to Rupays network is
lower costs.

Foreign card payment systems charge $50,000 to banks as joining fees.

In contrast, RuPays services will be free of cost to banks.

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Given that domestic technology has been used, RuPays platform is expected to reduce
banks costs in issuing and managing debit card transactions by as much as 40 percent.

NPCIs charges per transaction are also expected to be almost half of what global payment
companies charge therefore the customers will benefit too.

NPCI will soon provide a full range of card payment services including the RuPay ATM, RuPay
MicroATM, Debit, Prepaid and Credit Cards which will be accepted in India and abroad, across
various channels like POS, internet, IVR and mobile. Initial focus of NPCI would be to approach
those banks who have not been issuing any payment card at all. Regional Rural Banks and urban
co-operative banks are ideal. It can be clearly seen that if implemented properly, this initiative will
promote financial inclusion in India.
The lower cost for banks is expected to translate into lower costs and greater acceptance for
consumers. However, what could tilt the scales considerably in favour of debit card use is lower
processing fees. Currently, both credit cards and debit cards are charged the same per transaction.
The RBI believes that needs to change.

The reason for the belief that the debit card interchange fee should be lower because credit
cards get paid after sometime, whereas in debit cards, there is an instantaneous debit into
the account. Hence, logically debit cards charges should be lower.

RuPay-based credit cards will also be introduced by March 2015.

RuPay, which was launched last March, was initially backed by four public sector banksState Bank
of India, Bank of Baroda, Bank of India and Union Bank of India. These banks had started issuing
debit cards based on the platform in order to compete with international payment product
facilitators such as MasterCard and Visa.

So far, nearly 3 million RuPay debit cards have been issued.

The next phases of the RuPay rollout will involve the launch of EMV and contactless cards
and credit cards.
o

EMV stands for Europay, MasterCard and Visa, a global standard for inter-operation
of integrated circuit cards (IC cards or "chip cards") and IC card capable point of sale
(POS) terminals and automated teller machines (ATMs), for authenticating credit
and debit card transactions.

It is a joint effort between Europay, MasterCard and Visa to ensure security


and global interoperability so that Visa and MasterCard cards can continue
to be accepted everywhere.

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The EMV technology will speed up adoption of mobile payments. This new
chip technology has the added benefit of the ability to reduce use stolen
payment card data. If data is compromised, a counterfeit card would be
unusable without the presence of the cards unique elements.

About NPCI
The Reserve Bank of India, after setting up of the Board for Payment and Settlement Systems in
2005, released a vision document incorporating a proposal to set up an umbrella institution for all
the retail payment systems in the country.

The core objective was to consolidate and integrate the multiple systems with varying
service levels into nation-wide uniform and standard business process for all retail payment
systems.

The other objective was to facilitate an affordable payment mechanism to benefit the
common man across the country and help financial inclusion.

Indian Banking Associations untiring efforts for the next three years helped turn this vision a reality.
National Payments Corporation of India (NPCI) was incorporated in December 2008 and the
Certificate of Commencement of Business was issued in April 2009. It has been incorporated as a
Section 25 company under Companies Act and is aimed to operate for the benefit of all the member
banks and their customers. The authorized capital has been pegged at Rs 300 crore and paid up

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capital is Rs 100 crore so that the company can create infrastructure of large dimension and operate
on high volume resulting payment services at fraction of the present cost structure.

The RuPay card by NPCI is meant to be on the lines of China Union Pay - a Chinese
government promoted payments and settlement platform for card transactions that broke
the Visa-Mastercard stranglehold.
o

China Union Pay (CUP) was a national agenda for a few years by mandating all
domestic transactions to be routed through the national card system. Now China
Union Pay cards are accepted in 26 countries. The card base is 1.8 billion. Bulk of the
payments are made in China by CUP cards. Although it may not be possible to
mandate such transaction flow in India, a domestic card is not a distant dream if all
banks work in a co-operative framework. NPCI can reach the scale of China Union
Pay by excelling in service quality and by placing the next generation products and
services.

Two years ago, NPCI cut the charges for facilitating customers use their debit cards in ATMs
of other banks. It has now promised the same in the card space.
o

First in debit cards where processing fees will be 40% lower and later in credit cards
which will be launched from 2015.

Although shops will be the initial beneficiary of lower debit card charges, it will ultimately
benefit customers as it will make it viable for shops to accept card payments for even lowvalue transactions.

Also low-margin businesses which refused to accept cards because of charges of around
1.8% at present will be incentivized to accept card payments.

India will also save hundreds of crores in foreign exchange by having a domestic payment
system as Visa and Mastercard are paid in foreign currency.

Quick Questions
Q. What is the National Financial Switch?
A. The National Financial Switch facilitates routing of ATM transactions through interconnectivity between the Bank's Switches, thereby enabling the citizens of the country to
utilize any ATM of a connected bank. National Financial Switch (NFS) was conceptualised,
developed and implemented by Institute of Development and Research in Banking
Technology (IDRBT), Hyderabad with a view to inter-connect the ATMs in the country and
facilitate convenience banking for the common man.

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The Institute started off the switch by connecting the ATMs of three banks. Thereafter, the
Institute continuously worked towards bringing all banks on board and by December 2009,
the network had grown to connect 49,880 ATMs of 37 banks, thereby emerging as the
largest Network of shared ATMs in the country.
The Institute handed over the National Financial Switch to National Payments Corporation of
India (NPCI) in 14 December 2009.
Q. Rupee has recently fallen to its lowest ever levels why did it fall and who will benefit from the
fall?
A. The rupee fell against the dollar on account of factors like foreign investment outflows
from Indian markets-both debt as well as equity and globally stronger dollar (as against
other currencies as well). The outflows were mainly caused by a statement from the US
Federal Reserve that indicated tapering of quantitative easing going forward.
Structural factors like India's high current account deficit makes rupee very vulnerable to
external shocks. Typically, the currency of a country with high current account deficit tends
to depreciate in such situations, which has been the case with the rupee too.
Indian exporters like IT companies who earn in foreign currency, are set to benefit with
rupee fall. Also, tourists who plan to visit India will find the exchange rate attractive. NonResident Indians, who remit money home regularly, are also using the opportunity to
convert their foreign currency savings into rupee.

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Assanges Anniversary
The maverick founder of WikiLeaks has completed a year inside the Ecuador Embassy in London. Let
us be technically correct here while he is in London, as long as he stays in Ecuador Embassy, he is
deemed to be in Ecuador because Ecuadors London embassy belongs to Ecuador, not the UK. Mr
Assange, who arrived at the Ecuadorean embassy a year ago, will be arrested if he leaves the
building. Even if he goes out of the embassy for a walk, he'll be extradited to Sweden to answer rape
accusations after which he has no promise from Sweden to deny further extradition efforts to
America, where a grand jury investigation into WikiLeaks awaits. This also means that London's
Metropolitan Police have been devoting their resources to keeping tabs on Assange for a year.
Meanwhile, WikiLeaks continues to reveal more information, making many governments really
nervous. This case is fascinating for many reasons the fight for the freedom of information even at
the risk of national security and the legal complications arising out of the presence of Julian
Assange, the most wanted man by the US in the UK but within a safe embassy. We will take this up
in two parts today we discuss Julian & key revelations of Wikileaks, tomorrow we discuss the issue
of Diplomatic Immunity.
Who is Julian?
Well, the answer depends on whom you ask! To his fans, Julian Assange is a brave campaigner for
truth. To his critics, he is a publicity-seeker who has endangered lives by putting a mass of sensitive
information into the public domain. Those who have worked with him describe him as intense,
driven and highly intelligent - with an exceptional ability to crack computer codes.

He set up Wikileaks, which publishes confidential documents and images, in 2006 - making
headlines around the world in April 2010, when it released footage showing US soldiers
shooting dead 18 civilians from a helicopter in Iraq.
o But, later that year, he was detained in the UK after Sweden issued an international
arrest warrant over allegations of sexual assault.
Swedish authorities want to question him over claims that he raped one
woman and sexually molested and coerced another in August that year,
while on a visit to Stockholm to give a lecture. He says both encounters were
entirely consensual.
He spent the following months fighting extradition while under house arrest
in a small rural town in England. In late May 2012, however, Britain's
Supreme Court ruled that he should be extradited to Sweden to face
questioning.
Assange had indicated that he would challenge such a ruling at the European
Court of Human Rights.
In mid-June 2012, Assange sought refuge in the Ecuadorean embassy in
London, where he remains after being granted political asylum by the South
American country.

The UK government has said it will not allow him safe passage out of the country to fly to Ecuador,
while the Swedish foreign ministry insisted the sole reason they want Mr Assange extradited is so

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the allegations against him can be properly investigated. Assange insists that if he goes to Sweden,
he will immediately be deported to the US, where they will charge him for crimes against the state
which may even lead to death penalty.
Ecuador's foreign minister Ricardo Patino has urged the UK government to respect his country's
sovereign decision. The UK has so far done exactly that and chose not to enter the Ecuador embassy
to arrest Assange.

The British government had initially suggested it could use its discretionary powers under
the Diplomatic and Consular Premises Act 1987 to enter the embassy and arrest Assange
after giving the embassy due notice. However, it later retracted the suggestion, following
condemnation from Ecuador's Foreign Minister Ricardo Patio and President Rafael Correa.

Julian has a treadmill, and a connection to the Internet, through which he's been publishing small
leaks and conducting interviews. The indoor lifestyle has taken its toll on Julian, and it led to his
contracting a chronic lung condition last fall.
What has WikiLeaks revealed so far?
Quite a lot actually! Many countries have been exposed, India included. Even the UN has not been
spared. Of course, the countries have denied the accusations. Below we list down the key
revelations by WikiLeaks so far, country-wise, in alphabetical order (courtesy The Guardian, BBC & of
course, WikiLeaks!).
Afghanistan

Concern among the US and other foreign officials over the fitness of President Karzai to govern.
"[Karzai is] a paranoid and weak individual unfamiliar with the basics of nation-building."

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Australia

Then-PM Kevin Rudd described as "mistake-prone control freak" who makes "snap announcements
without consulting other countries or within the Australian government".
"His performance so far demonstrates that he does not have the staff or the experience to
do the job properly."
Baltic states

US Secretary of State Hillary Clinton signed a confidential cable saying allies in NATO had agreed to
expand the contingency plan to defend Poland, to include the Baltic states.
"The expansion was formally submitted to Allies for decision under a silence procedure."
Burma

Burma may be building missile and nuclear sites in remote jungle locations with support from North
Korea, according to US embassy cables from Rangoon.
"The North Koreans, aided by Burmese workers, are constructing a concrete-reinforced
underground facility that is '500ft from the top of the cave to the top of the hill above'."
China

The US urged China to stop a shipment of missile components from North Korea to Iran in 2007, and
also expressed concern over Chinese computer hacking.
"The best way to prevent these shipments in the future is for Chinese authorities to take
action."
China - Africa

The US assistant secretary of state for African affairs describes China as "aggressive and pernicious",
and says Beijing wants to secure African votes in the UN. Another cable alleges that the Chinese paid
bribes to win contracts in Kenya.
"China is a very aggressive and pernicious economic competitor with no morals. China is not
in Africa for altruistic reasons."

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Cuba

In 2006 Cuban leader Fidel Castro was close to death after suffering a perforated intestine during a
flight, sources told US diplomats in Havana.
"He won't die immediately, but he will progressively lose his faculties and become ever more
debilitated until he dies."
Germany

In 2004, a German citizen was snatched in Macedonia and allegedly taken to a secret prison by the
CIA. In a separate cable Chancellor Angela Merkel is labelled "Risk averse and rarely creative".
"Our intention was not to threaten ... but rather to urge that the German Government weigh
carefully implications for relations with the US."
Guantanamo

The US military's assessments of detainees at Guantanamo Bay (GTMO) show many were considered
to be innocent or low risk. Only 220 of the 780 ever held there were ranked as dangerous terrorists.
"It is undetermined as to why this detainee was transferred to GTMO...It is GTMO's
assessment that this detainee is not an enemy combatant."
India

The International Red Cross sent evidence to the US about widespread torture by Indian security
forces in Kashmir, including beatings, electric shocks and sexual abuse.
"The continued ill-treatment of detainees... have led the ICRC to conclude that New Delhi
sanctions torture."
Iran

A number of Arab leaders called on the US to attack Iran to stop its suspected nuclear weapons
programme. President Mahmoud Ahmedinejad is also referred to as "Hitler" by UAE defence
minister.
"[King Hamad of Bahrain] argued forcefully for taking action to terminate their nuclear
program, by whatever means necessary."
Italy

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Prime Minister Silvio Berlusconi is described as "feckless and vain" and had profited from a
"nefarious connection" with Russian PM Vladimir Putin.
"Berlusconi admires Putin's macho, decisive, and authoritarian governing style, which the
Italian PM believes matches his own."
Koreas

China frustrated with North Korea and coming round to the view the Korean peninsula should be
reunified under Seoul's control in the long term. North Korea's Kim Jong-il described by US diplomats
as a "flabby old chap".
"We need to solve this problem. It is very troublesome," China's ambassador to Kazakhstan
told the Americans.
Libya

Libyan leader Colonel Gaddafi relies heavily on his long-time Ukrainian nurse, described as a
"voluptuous blonde".
"Gadaffi has been described as both mercurial and eccentric, and our recent first-hand
experiences with him demonstrated the truth of both characterisations."
Libya - UK

Libyan leader Colonel Gaddafi made "thuggish" threats to halt all trade deals if Lockerbie bomber
Abdelbaset Ali al-Megrahi died in jail.
"The Libyans have told HMG flat out that there will be "enormous repercussions" for the UKLibya bilateral relationship if Megrahi's early release is not handled properly."
Mexico

The Mexican army was failing in its fight against drugs cartels.
"Mexican security institutions are often locked in competition... information is closely
guarded, and joint operations are all but unheard of."
Nicaragua

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Embassy put together "rap sheet" of claims against Sandinista leader Daniel Ortega including links
with the drugs trade.
"Escobar's drug trafficking operation received Ortega's approval to land and load airplanes in
Nicaragua as they sought to ship cocaine to the United States. In return, Ortega and the
FSLN received large cash payments from Escobar."
Nigeria

In 2009, Shell's top executive in Nigeria told US diplomats that the oil company had informants in all
ministries dealing with the industry.
"She said... Shell had seconded people to all the relevant ministries and that Shell
consequently had access to everything that was being done in those ministries."
Pakistan

US and British diplomats feared that Pakistan's nuclear material could fall into terrorists' hands and
that the US had been trying to remove highly enriched uranium from a research facility since 2007.
"The UK has deep concerns about the safety and security of Pakistan's nuclear weapons."
Russia

The country is described as being a corrupt, autocratic kleptocracy centred on the Prime Minister
Vladimir Putin. A separate cable describes President Medvedev as "Robin" to Putin's "Batman".
"[Spanish prosecutor Jose 'Pepe' Grinda Gonzalez] stated that he considers Belarus,
Chechnya and Russia to be virtual 'mafia states'."
Saudi Arabia

US Secretary of State Hillary Clinton warns that donors in Saudi Arabia are the "most significant
source of funding to Sunni terrorist groups worldwide".
"More needs to be done since Saudi Arabia remains a critical financial support base for alQaeda, the Taliban, LeT, and other terrorist groups, including Hamas, which probably raise
millions of dollars annually from Saudi sources, often during Hajj and Ramadan."

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Saudi Arabia - Hezbollah

Saudi Arabia proposed an Arab-led military force to destroy Hezbollah in Lebanon in 2008.
"Saud concluded by underscoring that a UN/Arab peace-keeping force coupled with US air
and naval support would "keep out Hezbollah forever" in Lebanon."
Spain

Embassy claims Rolls-Royce lost out on a key contract with the Spanish military following lobbying of
Spain's Prime Minister Jose Luis Zapatero by Washington.
"Moncloa - the office of the President - overturned the decision and it was announced that
GE had won the bid. The Ambassador is convinced that Zapatero personally intervened in
the case in favour of GE."
Sri Lanka

President Mahinda Rajapaksa was responsible for alleged war crimes, according to a January 2010
cable sent by the US ambassador.
"There are no examples we know of a regime undertaking investigations of its own troops or
senior officials for war crimes while in power."
Sudan

President Omar al-Bashir siphoned off as much as $9bn of his country's funds and placed it in foreign
accounts, according to cables recounting conversations with International Criminal Court chief
prosecutor Luis Moreno Ocampo.
"Ocampo suggested if Bashir's stash of money were disclosed, it would change Sudanese
public opinion from him being a 'crusader' to that of a thief."
Thailand

Three influential figures in Thailand told US diplomats about their concern over the prospect of
Crown Prince Vajiralongkorn becoming king.

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"All three had quite negative comments about Crown Prince Vajiralongkorn. While asserting
that the Crown Prince will become King, [two of the officials] implied the country would be
better off if other arrangements could be made."

UK

Former Prime Minister Gordon Brown was perceived to be "finished" by US diplomats in summer
2008, while the UK also kept quiet about a loophole allowing the US to continue storing cluster
bombs on its territory despite an international ban.
"A terrible by-election defeat in Scotland has left the Labour Party reeling and fuelled fears
among MPs that Brown's premiership may now be beyond repair."
UK - Royal Family

The Duke of York criticised the Serious Fraud Office probe of an arms deal between BAE and Saudi
Arabia and spoke in a rude manner during an official engagement.
"[Prince Andrew] railed at British anti-corruption investigators, who had had the 'idiocy' of
almost scuttling the Al-Yamama deal with Saudi Arabia."
United Nations

Diplomats were instructed under Secretary of State Hillary Clinton's name to collect DNA samples,
fingerprints and credit card details of key UN officials.
"Reporting officers should include as much of the following information as possible...
organizational titles; names, position titles and other information on business cards;
numbers of telephones, cell phones, pagers and faxes; compendia of contact information."
United States

US State Department asks US missions for list of key facilities around the world it describes as vital to
its national security and provides 2008 list.
"BAE Systems (Operations) Ltd., Preston, Lancashire, United Kingdom: Critical to the F-35
Joint Strike Fighter..."

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Quick Questions
Q. What are the options for the UK if it wants to arrest Julian?
A. Britains only real option is to doggedly pursue arrest and extradition, however long it
takes. Time is, after all, on its side: Assange or Ecuador must tire of this eventually, and a
change of regime in Quito could mean the police are welcomed in.
Q. Any data on how much has been spent by the UK on waiting for and watching Julian?
A. From July 2012 through May 2013, the full cost has been 3.8 million ($5,963,340), '700,000 ($1,099,560) of which are additional, or overtime costs. He surely has made them
pay

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Diplomatic Immunity
Its a year since Julian Assanges extraordinary decision to seek refuge in Ecuadors London embassy.
The UK government has spent the whole year helplessly watching Julian make statements from that
embassy and has so far abided by the conventions of international diplomatic principles. The
government has three broad options: it can de-recognise Ecuadors embassy or break off diplomatic
relations and close it, so that police can enter the embassy building and arrest him; it can make
some sort of deal with Julian Assange letting him go to Ecuador or giving him some guarantee; or it
can let the police continue their stubborn watch for another year or more. Edward Snowden, the
American whistleblower who exposed evidence of a global surveillance regime conducted by US and
UK intelligence agencies (read our blog on the same here), has left Hong Kong legally. He is said to be
bound for the Republic of Ecuador via a safe route for the purposes of asylum. Hugo Chvez's
successor, Nicols Maduro has maintained the anti-US rhetoric (read 'Venezuela after Chavez')so is
likely to be willing to embrace Snowden too. Is there a need to review this whole concept of
diplomatic immunity in light of the recent incidents across the world?
Diplomatic Immunity
Diplomatic immunity is a form of legal immunity and a policy held between governments that
ensures that diplomats are given safe passage and are considered not susceptible to lawsuit or
prosecution under the host country's laws, although they can still be expelled. It was agreed as
international law in the Vienna Convention on Diplomatic Relations (1961), though the concept and
custom have a much longer history.

The Vienna Convention on Diplomatic Relations of 1961 is an international treaty that


defines a framework for diplomatic relations between independent countries. It specifies the
privileges of a diplomatic mission that enable diplomats to perform their function without
fear of coercion or harassment by the host country. This forms the legal basis for diplomatic
immunity. Its articles are considered a cornerstone of modern international relations.
o

As of June 2013, it has been ratified by 189 states.

Article 22 of this convention is saving Julian Assange from being arrested.

Article 22 - The premises of a diplomatic mission, such as an embassy, are


inviolate and must not be entered by the host country except by
permission of the head of the mission. Furthermore, the host country must
protect the mission from intrusion or damage. The host country must never

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search the premises, nor seize its documents or property. Article 30 extends
this provision to the private residence of the diplomats.

The Vienna Convention is explicit that "without prejudice to their privileges and immunities,
it is the duty of all persons enjoying such privileges and immunities to respect the laws and
regulations of the receiving State." Nevertheless, on some occasions, diplomatic immunity
leads to some unfortunate results; protected diplomats have violated laws (including those
that would be violations at home as well) of the host country and that country has been
essentially limited to informing the diplomat's nation that the diplomat is no longer welcome
(persona non grata).

Diplomatic agents are not, however, exempt from the jurisdiction of their home state, and
hence prosecution may be undertaken by the sending state; for minor violations of the law,
the sending state may impose administrative procedures specific to the foreign service or
diplomatic mission.

Many principles of diplomatic immunity are now considered to be customary law.

Diplomatic immunity as an institution developed to allow for the maintenance of


government relations, including during periods of difficulties and even armed conflict.

When receiving diplomatswho formally represent the sovereignthe receiving head of


state grants certain privileges and immunities to ensure they may effectively carry out their
duties, on the understanding that these are provided on a reciprocal basis.
o

Originally, these privileges and immunities were granted on a bilateral, ad hoc basis,
which led to misunderstandings and conflict, pressure on weaker states, and an
inability for other states to judge which party was at fault. Vienna Convention
codified the rules and agreements, providing standards and privileges to all states.

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Immunity is not absolute


It is possible for the official's home country to waive immunity; this tends to happen only when the
individual has committed a serious crime, unconnected with their diplomatic role (as opposed to,
say, allegations of spying), or has witnessed such a crime. If immunity is waived by a government so
that a diplomat (or their family members) can be prosecuted, it must be because there is a case to
answer and it is in the public interest to prosecute them.

For example, any diplomat, if he commits a crime in host country, can be arrested without
violating the Vienna Convention.

The case of the Italian Marines in India


The Enrica Lexie is an Italian-flagged tanker, which in addition to a crew, had a unit of six Italian
marines on board to deter pirate attacks.
On February 15, 2012, two of those marines shot and killed two Indian fishermen on board a
fishing boat, the Saint Antony. The facts surrounding the incident are still contested.
The location of the shooting remains disputed, with claims that it occurred at 14 or 22
nautical miles off of Indias coast. Moreover, the events leading up to the shooting are
equally unclear.
o

The marines and crew of the Enrica Lexie insist they only fired warning shots against
what they believed was a pirate craft, which may or may not have been the Saint
Antony or some as yet-unidentified third vessel. They also insist they had first tried
to use other signals to deter the crafts approach.

In contrast, the fishing crew suggests they were waiting for the tanker to pass when
they were fired on without provocation.

It is immaterial where the incident occurred (somewhere between 14-22 nautical


miles off Indias coast); the entire disputed range falls outside Indias territorial sea,
but within its contiguous zone.

Unlike the territorial sea where a State has general prescriptive jurisdiction,
a State only has jurisdiction over infringement of its customs, fiscal,
immigration or sanitary laws and regulations within its contiguous zone.
Clearly Indias case will be weak if based on international maritime laws.

Indias position This is a criminal offence since the fishing boat is registered in
India and two Indian citizens were killed.

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Indias position is that St. Anthony, the fishing vessel aboard which the two
fishermen were killed, was an Indian vessel; and under Indian law and the
Convention for the Suppression of Unlawful Acts of Violence Against the
Safety of Maritime Navigation (SUA Convention), India has jurisdiction.

Italys position The incident was due to anti-piracy action and not a deliberate
crime as per international law. Shooting was outside the Indian territorial waters
so India has no right to try the marines at home. This should be treated as a
diplomatic issue.
Current Status On 18 March 2013, the Supreme Court of India restricted Italian
ambassador, Daniele Mancini, from leaving India for breaching an undertaking given
to the apex court. Despite Italian and European Union protests regarding the
restrictions as contrary to the Vienna Convention on Diplomatic Relations, the
Supreme Court of India said it would be unacceptable to argue diplomatic
immunity after voluntarily subjecting to court's jurisdiction. The Italian envoy had
invoked Article 32 of the Constitution of India when filing an affidavit to the
Supreme Court taking responsibility for the return of the two Italian marines to India
after casting their votes in the March 2012 general elections in Italy. The Indian
Supreme Court opined that the Italian ambassador had waived his diplomatic
immunity and could be charged for contempt. The Supreme Court had allowed the
marines to return home in Italy on the assurance of the Italian ambassador. Sense
prevailed and Italy sent the marines back to be tried in India, but only after a tacit
assurance that they will not be given death penalty.

Quick Questions
Q. When did Diplomatic Immunity get accepted as a practice in India?
A. Quite early. The concept of diplomatic immunity can be found in ancient Indian epics like
Ramayana (between 3000 and 2000 BC) and Mahabharata (around 4th century BC) where
messengers and diplomats were given immunity from capital punishment. In Ramayana,
when the demon king Ravana ordered the killing of Hanuman, Ravana's younger brother
Vibhishana pointed out that messengers or diplomats should not be killed or arrested, as per
ancient practices!
Q. Who does the property of an embassy belong to the host country or the represented country?
A. Contrary to popular belief, diplomatic missions do not enjoy full extraterritorial status
and are not sovereign territory of the represented state. Rather, the premises of diplomatic
missions remain under the jurisdiction of the host state while being afforded special
privileges (such as immunity from most local laws) by the Vienna Convention on Diplomatic
Relations. Diplomats themselves still retain full diplomatic immunity, and (as an adherent to
the Vienna Convention) the host country may not enter the premises of the mission without

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permission of the represented country. The term "extraterritoriality" is often applied to


diplomatic missions, but only in this broader sense.
Q. Which former head of state took refuge in an Indian embassy recently?
A. The former Maldivian President, Mohamed Nasheed, walked into the Indian High
Commission in Male in March 2013 after an arrest warrant was issued against him for failure
to appear in a local court.

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The Secretary of State is in India


It is preaching time! The Secretary of State of the United States is in India. Indian and American
interlocutors are talking, led by external affairs minister Salman Khurshid and secretary of state John
Kerry for their fourth annual strategic dialogue in New Delhi. During their first meeting, they
reviewed the extensive transformation of the bilateral relationship and identified key sectors of
cooperation that will continue to add strategic depth to the partnership. Unlike his predecessor
Hillary Clinton, Kerry avoided associating Pakistan with terrorism and instead advised India to
deepen bilateral trade ties with its neighbour. He hoped the two countries build up enough trust to
start investing in each others economies so that others could invest in you, he said in a reference
to the hostility between the two countries that keeps many potential investors away. Departing
from his Hillary Clintons line of sympathizing with the victims of the 2008 Mumbai attacks, he chose
to sympathise with the victims of the Uttarakhand flash floods instead. He managed to read few
newspapers on board his special plane. Kerry announced that the US Vice President Joe Biden will
travel to India next month, his first official visit after assuming the position in 2008. Are the dynamics
of India-US relationship changing? Let us explore.
From hyphenation to bilateralism to hyphenation
Not very long back, the attitude of the US towards India was known as hyphenation: everything to
do with India was India-Pakistan, like it is Af-Pak currently, denoting Afghanistan-Pakistan, not a
standalone relationship with either country. Nothing would be done by a US administration for
decades unless it was done for Pakistan as well. Often times, more was done for Pakistan. It was Bill
Clinton who transformed Indo-US relations through his visit to India in 2000 the first US
presidential visit to New Delhi in 22 years though he went to Islamabad as well, it was only for a
few hours.
George Bush ended the policy of hyphenation and Hillary Clinton, Kerrys predecessor, built on the
new policy of engaging India on its own. Atal Bihari Vajpayee called India and America natural
allies. Obama described the friendship as one of the 21st centurys defining partnerships. But
since the new secretary of state assumed office, the perception has returned that Washington is
reverting to the policy of equating India and Pakistan for bilateral initiatives something which India
is not comfortable with, and justifiably so!

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This perception grew after Kerry sought out Pakistans army chief, Gen. Ashfaq Parvez
Kayani, by inviting him for unusual meetings in third-country capitals, Brussels and Amman,
recently.

It is to Kerrys credit that, in the end, he decided not to go to Islamabad on this trip. Had he
gone, Mondays strategic dialogue would have become a public relations disaster, especially
after doubts in India, expressed between the lines in an official statement two days ago,
about Washingtons questionable role in a planned reconciliation with the Taliban.
o

India has voiced its support to Afghanistans opposition to the Taliban having
opened a political office in Doha and asserted that the reconciliation process in the
war-torn country should not undermine its legitimate government or confer
legitimacy to insurgent groups. The US, in a surprise move, has invited Taliban for
peace talks, thereby making Hamid Karzai, the President of Afghanistan, really angry.

The Joint Statement

The best way to understand the outcome of any bilateral summit is to cut through the jargons of a
bilateral statement and look at the key declarations. TestCracker has looked into the bilateral
statement of the Fourth India-US Strategic Dialogue. In order to understand the undercurrents of
India-US relationship, it is important to read these lines and even read between these lines! The
following are the key excerpts

On joint presence in the Indian Ocean The two sides expressed their commitment to
continue to consult closely on issues relating to the region both bilaterally and trilaterally,
including in the India-US-Japan format, which has had four successful meetings. The United

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States and India reaffirmed the importance of maritime security, unimpeded commerce and
freedom of navigation, and the peaceful resolution of maritime disputes in accordance with
international law. India welcomed the entry of the United States to the Indian Ocean Rim
Association for Regional Cooperation (IOR-ARC) as a Dialogue Partner in November 2012,
and the United States welcomed Indias Observer status to the Arctic Council in May 2013.
o

The Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC), initially


known as the Indian Ocean Rim Initiative, is an international organization with 20
member states. It was first established in Mauritius on March 1995 and formally
launched on 67 March 1997. In 2011 six priority areas of cooperation were
identified for IOR-ARC. These include: Maritime Safety and Security, Trade and
Investment Facilitation, Fisheries Management, Disaster Risk Management,
Academic and Science & Technology Cooperation, and Tourism and Cultural
Exchanges.

The Arctic Council is a high-level intergovernmental forum that addresses issues


faced by the Arctic governments and the indigenous people of the Arctic. It has eight
member countries: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and
the United States.

On Afghanistan Minister Khurshid and Secretary Kerry called for sustained commitment
and support of the international community for a stable, democratic, united, sovereign and
prosperous Afghanistan. The United States and India each reiterated their enduring
commitments to support the Afghan Government and all people of Afghanistan through the
transition process and beyond, in accordance with their respective Strategic Partnership
Agreements. The two leaders emphasized the importance of ensuring that the international
community continues to support free, fair, transparent and inclusive Presidential and
Provincial Council elections in Afghanistan in 2014. They emphasized the need for continued
efforts to enhance the capacity of the Afghan National Security Forces and sustain the socioeconomic development of Afghanistan.

On Defence Ties The two co-chairs recognized that defense, counterterrorism, and science
and technology have become important aspects of the relationship. They welcomed the fact
that defense trade had reached nearly $9 billion, and that U.S. and Indian military forces
were continuing their professional exchanges, including through regular military training
exercises, like the Army series YUDH ABHYAS, which took place in May, and the naval series
MALABAR, planned for later this year. They welcomed the delivery of the first P-8I Poseidon

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for the Indian Navy in May and the first C-17 Globemaster III for the Indian Air Force in
June.
o

Yudh Abhyas is the annual bilateral soldier training between India and the United
States. Yudh Abhyas literally means "training for war" in Hindi. In military language,
it is a theater security cooperation exercise between the Indian Army and United
States Army Pacific. Practically speaking, it is an open exchange of knowledge and
operating procedures between key regional partners -- the world's oldest democracy
and the world's largest democracy -- through field and command post exercises.

Exercise Malabar is a multilateral naval exercise involving the United States, India,
Japan, Australia, and Singapore. The annual MALABAR series began in 1992, and
includes diverse activities, ranging from fighter combat operations from aircraft
carriers, through Maritime Interdiction Operations Exercises.

The Boeing C-17 Globemaster III is a large military transport aircraft. It was
developed for the United States Air Force (USAF) from the 1980s to the early 1990s
by McDonnell Douglas.

On trade Growing trade and investment continue to drive the India-US partnership
forward, and bilateral trade in goods and services has reached close to $100 billion. The
two sides welcomed the adoption of new regulations regarding foreign investment ceilings in
several sectors of the Indian economy, and the creation of new Cabinet-level mechanisms to
expedite investment in Indias infrastructure. The co-chairs supported increased investment
in mutually-rewarding opportunities in their vast and growing markets. The two sides will
resume negotiations to conclude a Bilateral Investment Treaty/Bilateral Investment
Promotion and Protection Agreement as soon as Indias revised model BIPA text is ready.
o

BIPA - As part of the Economic Reforms Programme initiated in 1991, the foreign
investment policy of the Government of India was liberalised and negotiations
undertaken with a number of countries to enter into Bilateral Investment Promotion
& Protection Agreement (BIPAs) in order to promote and protect on reciprocal basis
investment of the investors. Government of India have, so far, (as on July 2012)
signed BIPAs with 82 countries out of which 72 BIPAs have already come into force
and the remaining agreements are in the process of being enforced. In addition,
agreements have also been finalised and/ or being negotiated with a number of
other countries.

The objective of Bilateral Investment Promotion and Protection Agreement


is to promote and protect the interests of investors of either country in the

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territory of other country. Such Agreements increase the comfort level of
the investors by assuring a minimum standard of treatment in all matters
and provides for justifiability of disputes with the host country.

On Clean Energy India and the United States plan to continue their ongoing efforts to
expand partnerships in clean energy and energy efficiency through the India-US Partnership
to Advance Clean Energy (PACE) and under the multilateral Clean Energy Ministerial. Since
2009, PACE - Deployment has mobilized approximately $2 billion in clean energy financing
to India and PACE Research has created innovative public-private consortia through the
$125 million Joint Clean Energy Research & Development Centre. They noted the decision
taken to create a new Sustainable Growth Working Group under the India-US Energy
Dialogue, and the growth of U.S. investment in Indias energy sector. India and the United
States welcomed additional efforts aimed at financing clean energy investments, promoting
the development of smart grid technologies, energy efficient buildings, solar power, smart
and efficient air conditioning and space cooling, and expanding off-grid access to clean
energy.

On Nuclear Energy The two sides noted the ongoing commercial discussions between
NPCIL and Westinghouse towards setting up a nuclear power plant at Mithivirdi in Gujarat.
They encouraged the two companies to expedite these consultations. They also took note of
the ongoing consultations between General Electric-Hitachi and NPCIL on setting up a
nuclear power plant in Andhra Pradesh. Both sides reaffirmed their commitment to the full
and timely implementation of the India-US civil nuclear cooperation agreement. The Minister
and Secretary reviewed the good progress on cooperation between the United States and
India on particle physics and expressed the desire to finalize an agreement by the end of this
summer. They also committed to encouraging the conclusion of talks between the U.S.
Nuclear Regulatory Commission (NRC) and the Indian Atomic Energy Regulatory Board
(AERB) on a bilateral information exchange arrangement, by fall 2013. The two sides also
praised collaborative research and development under the India-US Civil Nuclear Energy
Working Group, which will meet in Mumbai in July 2013 to discuss advancing cooperation in
accelerator technology and other nuclear physics research projects.

On Space Research They welcomed the announcement of NASA support through its Deep
Space Network facilities to ISROs Mars Orbiter Mission, and the ISRO-NASA technical
discussions to integrate a U.S. L-band and Indian S-band synthetic aperture radar on an
Indian spacecraft for earth observation studies. Both sides intend to cooperate bilaterally
and in multilateral forums to promote efforts to ensure the long term sustainability of outer

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space. To this end, both sides plan to undertake discussions on areas of mutual interest such
as space situational awareness, and collision avoidance as part of a Space Security
Dialogue.

On Climate Change The two sides welcomed the decisions taken at the United Nations
Framework Convention on Climate Change (UNFCCC) Conference of Parties held in Doha.
They resolved to carry out the Durban Platform, including by developing a protocol, another
legal instrument or an agreed outcome with legal force under the Convention applicable to
all Parties. They stressed the need for meaningful implementation of the mechanisms set up
under the UNFCCC process. Additionally, the two sides agreed to enhance the existing IndiaUS Global Climate Change Dialogue, and identify opportunities for further and significant
bilateral cooperation. Welcoming the outcome of the Rio+20 Conference in June 2012, the
two sides reaffirmed that eradication of poverty is at the heart of the global sustainable
development agenda.
o

The United Nations Conference on Sustainable Development (UNCSD), also known


as Rio 2012, Rio+20 or Earth Summit 2012 was the third international conference
on sustainable development aimed at reconciling the economic and environmental
goals of the global community. Hosted by Brazil in Rio de Janeiro from 13 to 22 June
2012, Rio+20 was a 20-year follow-up to the 1992 Earth Summit / United Nations
Conference on Environment and Development (UNCED) held in the same city, and
the 10th anniversary of the 2002 World Summit on Sustainable Development
(WSSD) in Johannesburg.

In Durban, governments decided to adopt a universal legal agreement on climate


change as soon as possible, but not later than 2015. Work will begin on this
immediately under a new group called the Ad Hoc Working Group on the Durban
Platform for Enhanced Action.

On Pakistan They also stressed the need for concerted efforts to address the challenge of
terrorism in the region, including the dismantling of terrorist safe havens and disrupting all
financial and tactical support for terrorism, and through strengthened cooperation in the
Global Counterterrorism Forum. The two leaders reiterated their commitment to continue
their cooperation on the Mumbai terror attack in November 2008, including through
continued exchanges of information between designated agencies to aid investigations and
trials relating to that attack.
o

Traditionally, Pakistan is always referred to as a safe haven for terrorism in Indian


statements. Kerry was not supposed to let this be included in the joint statement.

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But to everyones surprise, the phrase is present in the joint statement! This would
make the Indian diplomats very pleased.

Quick Questions
Q. Who was the first US President to visit India?
A. In 1959, Dwight D. Eisenhower was the first US President to visit India to strengthen the
staggering former ties. He was so supportive that the New York Times remarked, "It did not
seem to matter much whether Nehru had actually requested or been given a guarantee that
the US would help India to meet further Chinese Communist aggression. What mattered was
the obvious strengthening of Indian-American friendship to a point where no such guarantee
was necessary."
Q. Who is the most recent US President to visit India?
A. The current President Barrack Obama but in his previous term. In November 2010,
President Barack Obama visited India and addressed a joint session of the Indian Parliament,
where he backed India's bid for a permanent seat on the United Nations Security Council.

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Man Made Disaster or Natures Fury?


We wrote about the disaster in Uttarakhand a few days ago. The disaster continues to unfold. In a
horrific air-crash, 20 people, including personnel from the Indian Air Force, National Disaster
Response Force and the paramilitary Indo-Tibetan Border Police were feared dead in an IAF
helicopter crash. There are fears of an epidemic outbreak in the flood-ravaged areas of Uttarakhand
as hundreds of people from local villages reported to medical camps set up by the forces
complaining of fever, diarrhoea and vomiting. Three ITBP men engaged in rescue work in Kedarnath
have also reported sick. It seems like nature wont rest till its act of destruction is complete.
Authorities are now suspecting contamination of water resources in the area due to hundreds of
decaying bodies spread across the valley. Uttarakhand authorities are trying to arrange for as much
as 50 tonnes of wood and as much volume of desi ghee to conduct last rites of those who perished
in the deluge at Kedarnath. The death toll will be in thousands. The land of God has turned into a
town of ghosts. Environmentalists describe the death and damages as a man-made disaster while
geologists say the extent of destruction could have been far lesser if stricter regulations were in
place and authorities were equipped to deal with the situation. We look into this phenomenon of
man-made disasters today.
Man Made Disasters
Man-made disasters are specific events where an anthropogenic hazard has come to fruition. The
term anthropogenic designates an effect or object resulting from human activity. Human impact on
biodiversity is significant, humans have caused the extinction of many species, including the dodo
and, potentially, large megafaunal species during the last ice age. Though most experts agree that
human beings have accelerated the rate of species extinction, the exact degree of this impact is
unknown, perhaps 100 to 1000 times the normal background rate of extinction. Some authors have
postulated that without human interference the biodiversity of this planet would continue to grow
at an exponential rate.

Earthquakes, tornadoes, typhoons, and other natural disasters are bad enough, but things
get worse when human actions lead to additional, preventable problems.

The Disaster was always coming


When you change the course of a river by mining, cutting of trees indiscriminately and building
roads in a haphazard manner, such a calamity is bound to take place, says PP Dayani, director of the

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GB Pant Institute of Himalayan Environment and Development. He is pointing towards the


callousness with which man exploited the natural resource of the region. It is only natural then that
nature is taking revenge. The upper reaches of the Ganga have been made an engineers
playground. It is only natural then that nature is playing with all the engineering and testing all the
capabilities.
In Uttarakhand, indiscriminate development in the hill towns, with guest houses, hotels and all
manners of illegal encroachment taking place along the rivers, disturbed the natural balance of the
region. Since 2002 there has been a ban on building within 100 meters of the river bed. But also in
focus is the Uttarakhand government's resistance to declaring an environmentally fragile area as
'Eco Sensitive' and whether the state government was prioritising commercial concerns over the
environment.

The eco sensitive zones need to be declared in order to provide better sanctity to protected
areas; as an additional tool to strengthen the buffers and corridors around the Protected
Area network; and to check the negative impact of industrialization and unplanned
development in and around Protected Areas.

In December 2012, the Centre declared the 100 kms stretch along the Bhagirathi river from
Gangotri to Uttarkashi an 'Eco Sensitive Zone' which meant no development was permitted
there.

However, in May 2013 Chief Minister Vijay Bahugana met the Prime Minister along with a
delegation of his ministers and gave him a letter asking that the notification be taken back.
o

The Chief Minister argued that the move was being opposed by the people who
lived in the area as it would deny them the much needed development and
infrastructure, and would also restrict the number of tourists, which would be a
blow to the state's economy.

He also said that stopping construction would affect national security as the region,
which borders China, is strategically significant and roads are needed for the
movement of Army personnel and supplies.

MoEF had earlier questioned the state government on the need for so many small power
projects that are below 2 mega watt on the Ganges. On the other hand, a study conducted
on Uttarakhand hydro-projects by the Wildlife Institute of India had warned the flow and
water life in the entire Alaknanda and Bhagirathi basins may get affected because of the
constructions on the riverfront and rising number of dams.

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In 2010, a Comptroller and Auditor General (CAG) had had also stated that more than 40
hydro projects in the region was a serious threat to nature and bio-diversity of the region.
o

There are around 70 hydel projects working in three basins, namely, Alkananda,
Mandakini and Bhagirathi. So many dams and roads have been built in an
unscientific manner, which really have worsened the situation.

Last weeks floods have sounded an alarm bell. To pursue development without concern for the
fragile Himalayan environment is to invite disaster. Eco-sensitive development may mean a slower
monetary growth rate but a more sustainable and equitable one.

With thousands feared dead in flood-ravaged Uttarakhand, the state government is now
planning to declare at least six eco-sensitive zones in the region. After fighting the idea for
years, the Uttarakhand government has now confirmed that it would come up with a list of
eco-sensitive zones, which may include the flood-ravaged area as well, within a month. The
notification, however, would take time.

According to the environment ministry, at least 16 states and union territories are yet to submit
their proposals for eco-sensitive zones. Till April, the ministry had received about 214 proposals, out
of which only seven are declared sensitive zones.

Apart from Uttarakhand, the other states and union territories which did not submit the
proposals till April were Andaman and Nicobar, Chattisgarh, Chandigarh, Delhi, Goa,
Lakshadeep, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Orissa, Pondicherry,
Rajasthan, Uttar Pradesh and West Bengal.
Environmentalists believe that this may well be a wake-up call for other states too.

The Disaster was natural but the Damage was man-made


There was unprecedented rain within a few hours and as a repercussion, there was a cloudburst and
landslides (explained here). That was a natural disaster but the huge devastation was the result of
local factors. If you build a hotel or a house near a flood plain, damage like this is likely! Our Disaster
Management Authority (NDMA) has yet again failed.

The reason why the rescue teams were using satellite phones of the Indo-Tibetan Border
Police and Army is because six years after the receipt of the equipment, the satellite
communication network is not functional.
The cloudburst could not be forecast or sighted because the Doppler Weather Radars
bought for surveillance of severe and weather system is paid for but yet to be operational.
o Weather radar, also called weather surveillance radar (WSR) and Doppler
weather radar, is a type of radar used to locate precipitation, calculate its
motion, and estimate its type (rain, snow, hail etc.). Modern weather radars are
mostly pulse-Doppler radars, capable of detecting the motion of rain droplets in

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addition to the intensity of the precipitation. Both types of data can be analyzed
to determine the structure of storms and their potential to cause severe
weather.
The National Disaster Communication Network and the National Disaster Management
Informatics System are still in the planning stage, seven years after conceptualisation.
Only seven states had a State Disaster Response Force.

We can only hope that this tragedy makes all of us learn valuable lessons. Development has to be
within limits and without encroaching on the natural balance of a region. The same government
which till a month ago was dead against banning any construction activity in Uttarakhand has to now
take steps to declare eco-sensitive zones there. TestCracker hopes that other states and even the
national government are able to understand the language of nature. The gods have lost patience in
the capacity of men to reconstruct the environment. So they have taken things in their hands.the
lonely temple with hundreds of dead bodies around is a powerful message to those who dont
understand that development comes with a huge cost.

Quick Questions
Q. What is the NDMA?
A. On 23 December 2005, the Government of India enacted the Disaster Management Act,
which envisaged the creation of the National Disaster Management Authority (NDMA),
headed by the Prime Minister, and State Disaster Management Authorities (SDMAs) headed

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by respective Chief Ministers, to spearhead and implement a holistic and integrated


approach to Disaster Management in India.
Q. Which is truly Indias greatest man-made disaster?
A. Without any doubt, it is Bhopal Gas Tragedy. On December 2, 1984, the Union Carbide
India Limited pesticide plant sprang a gas leak. Over 500,000 people were exposed to methyl
isocyanine gas and other chemicals. Thousands of people died within the first hours of the
leak, but estimates between 5,000 to upwards of 16,000 deaths resulted from the leak
overall. This doesn't include other injuries survivors would endure such as blindness and
organ failure. Without question, Bhopal is one of the world's worst industrial disasters in the
world.

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