The Hindu Daily Review | Current Affairs and English | 5th November 2018

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♦ Hindalco gets $2.27 bn funding to buy Aleris

  • Kumar Mangalam Birla-led Hindalco Industries, through its overseas arm Novelis Inc., has secured funding of over $2.275 billion from a consortium of more than 10 banks to buy Aleris for $2.6 billion.
  • Satish Pai, MD, Hindalco Industries, told The Hindu: “We have raised funds at Libor plus 175 basis points, which is very competitive in current market. The funding, led by Citi Bank, Standard Chartered, among others, was subscribed by over two times.”
  • A global leader in aluminium-rolled products, the company has tied up with banks to provide up to $775 million of an incremental term loan with a five-year maturity and up to a $1.5-billion short-term bridge loan with a one-year maturity.
  • The company expects to replace the bridge loan with permanent financing soon after closing the transaction, depending on the market conditions. Novelis had signed a definitive agreement to acquire Aleris Corporation in July and has a liquidity position of $1.7 billion.
  • The acquisition continues to progress as expected and process remains on track to close nine to 15 months from the date of announcement, as previously communicated, subject to customary closing conditions and regulatory approvals, said Novelis in its earnings release.
  • When asked about the progress of the deal, Mr. Pai said, “We are awaiting regulatory approvals from the U.S., the EU and China and we hope to close it by April 2019.”

♦ Arnab Goswami among four new members of Nehru Memorial Museum and Library Society

  • The Centre has made four new appointments to the Nehru Memorial Museum and Library (NMML) Society, in place of the three previous members and another one, Pratap Bhanu Mehta, who had resigned from the membership.
  • The new NMML society members are former journalist Ram Bahadur Rai, who is also the chairman of the Indira Gandhi National Centre for the Arts, former Foreign Secretary S. Jaishankar, journalist Arnab Goswami and Bharatiya Janata Party MP Vinay Sahasrabuddhe, also the president of the Indian Council for Cultural Relations.
  • The term of the nominated members will be up to April 26, 2020, or until further orders, whichever is earlier. The notification dated October 29 mentions that the government has accepted the resignation of Pratap Bhanu Mehta from the society’s membership.
  • Dr. Mehta had resigned from the executive council in August 2016 over a disagreement with the recommendation for appointment of the institution’s next director.

♦ Nobel laureate Shimomura, who contributed to cancer studies, dies at 90

  • Japanese-born Marine biologist Osamu Shimomura, who won the Nobel Prize in chemistry, has died. He was 90.
  • His alma mater Nagasaki University said Monday that Shimomura died Friday of natural causes.
  • Shimomura and two American scientists shared the 2008 Nobel prize for the discovery and development of a jellyfish protein that later contributed to cancer studies.
  • Shimomura was born in northern Kyoto in 1928 and studied in Nagasaki, where he survived the Aug. 9, 1945, U.S. atomic bombing at age 16. His high school education was cut short during World War II as he was mobilized to work at a munitions factory.
  • He eventually earned chemistry degree in 1951 from Nagasaki College of Pharmacy.
  • In 1960 he moved to Princeton University, where he isolated the protein in samples of thousands of jellyfish taken from the U.S. West Coast, often with the help of his wife Akemi.
  • The protein known as Green Fluorescent Protein lets off a glow when it is illuminated with ultraviolet light and has become a key tool in studying biological processes in cells.
  • Shimomura was based in the U.S., but had moved back to Nagasaki to be close to his relatives, Nagasaki University officials said.
  • The devastation from the atomic bomb that killed 70,000 in Nagasaki, left a lasting impression on Shimomura and he often mentioned his experience and called for nuclear weapons ban in his lectures later in life.

In a first for India, HSBC facilitates blockchain-based transaction for RIL

  • In a first for India, British banking major HSBC has executed a trade finance transaction involving an export by Reliance Industries to an American client using the blockchain, which massively reduced the time taken for processing the documents.
  • The blockchain-enabled letter of credit transaction facilitated a shipment between Reliance and the US-based Tricon Energy, a joint statement issued by HSBC India and Reliance said.
  • “The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant seven-ten days to less than a day,” RIL joint chief financial officer Srikanth Venkatachari was quoted as saying in the statement.
  • The blockchain platform was integrated with the electronic bill of lading (eBL) platform to issue and manage an electronic bill of lading, it said, adding this allows a digital transfer of the title of goods from the seller to the buyer in the underlying trade.

L&T eyes pie of $200 bn solar power project in Saudi Arabia

  • Engineering and construction conglomerate Larsen & Toubro (L&T) is planning to bid for an EPC contract for a section of the $200 billion solar project in Saudi Arabia to be built with the backing of Japan’s SoftBank.
  • Confirming the development, R. Shankar Raman, CFO, L&T, told The Hindu, “These are billion dollar projects but we are not looking at building the entire project. Normally, these projects are done in consortium as they (Saudi Arabia) don’t give it to one contractor. “There will be [an] opportunity for us to do about $250 million -$300 million of the work order,” Mr. Raman said. Saudi Arabia’s Public Investment Fund and SoftBank signed a MoU in March to invest in building the world’s biggest solar power project in Saudi Arabia, a project expected to have the capacity to produce up to 200 gigawatts (GW) by 2030.
  • Asked about L&T’s competitiveness to bag such a project given that L&T had not done big solar projects in India, he said, “They (Saudi Arabia) are talking about [a] very large project. If you have to implement such a large project, you need capable people. Our advantage is that we know the market as we have operated there before and we have our resources there. It’s an area we understand technically so, obviously, we should be able to engineer, design and procure better. Ultimately, it will come down to if I we [are] competitive on price or not.”

Mawkyrwat Ultra: When a community that runs for everything decides to sprint for no reason

  • Swonding Molong first started running because it made him feel good. Later, he realised that it even helped him work better. Yet, for the longest time, Molong — a 55-year-old ginger farmer from Meghalaya — kept it a secret. “It started in 2015,” he says, “I would be up by 4am, when it was still dark.”  A little before 4.30am, Molong would put on his gumboots — the same ones he used in the fields — and set out into the dark.
  • Over the next hour, the farmer would run up and down the undulating roads of his village, only stopping to catch his breath, or quench his thirst at the little creek he would come by. “It was too early for anyone to see me,” he says, “if they did, they would laugh at me.”
  • In Molong’s village, Shngimawlein, in the South West Khasi Hills District’s Makyrwat area — running, something that came naturally to most of its residents, was always considered a means to do a chore. You ran to the market to buy something. You ran home from school at the end of the day. When other people in the world walked, in Makyrwat, you ran. But you never ran for no reason. “And that was what I was doing,” says Molong.

RBI Governor Urjit Patel gets show-cause notice over non-disclosure of wilful defaulters’ list

  • The Central Information Commission (CIC) issued a show-cause notice to RBI Governor Urjit Patel for “dishonouring” a Supreme Court judgment on disclosure of the wilful defaulters’ list, news agency PTI reported on Sunday.
  • The CIC, according to PTI, has also asked the Prime Minister’s Office, the Finance Ministry and the Reserve Bank of India (RBI) to make public the letter of former RBI governor Raghuram Rajan on bad loans.
  • Irked over the non-disclosure of names of wilful defaulters who have taken bank loans of Rs 50 crore and above by the RBI in spite of a Supreme Court order, the CIC has asked Patel to explain why a maximum penalty should not be imposed on him for “dishonouring” the court verdict, which had upheld a decision taken by then information commissioner Shailesh Gandhi, calling for disclosure of names of wilful defaulters.
  • Patel, speaking at the Central Vigilance Commission (CVC) on September 20, had said the guidelines on vigilance, issued by the CVC, were aimed at achieving greater transparency, promoting a culture of honesty and probity in public life and improving the overall vigilance administration in the organisations within its purview, the CIC pointed out.
  • “The commission feels that there is no match between what RBI governor and deputy governor say and their website regarding their RTI policy, and a great secrecy of vigilance reports and inspection reports is being maintained with impunity, in spite of the Supreme Court confirming the orders of the CIC in the Jayantilal case,” Information Commissioner Sridhar Acharyulu said.
  • He concluded that it would not serve any purpose to punish the CPIO for this defiance, because he acted under the instructions of the top authorities.
  • “The commission considers the governor as the deemed PIO responsible for non-disclosure and defiance of Supreme Court orders and CIC orders and directs him to show cause why a maximum penalty should not be imposed on him for these reasons, before November 16,” Acharyulu said.
  • He rejected the arguments of Santosh Kumar Panigrahy of the RBI that section 22 of the Right to Information (RTI) Act would not override various laws he quoted, prohibiting disclosure of names and details of wilful defaulters and hence, the RBI should be discharged from the obligations of disclosure.


Slowdown of Indian Economy and Improvement

Economy of a country depends on number of factors which are divided in three general categories like Primary, Secondary and Tertiary. Over independence-era, Indian economy till 1991 was based on a mixed economy which combines the features of capitalism and socialism resulting in interventionist policies and import substituting economy. This economy has always given much emphasis on agriculture which is called as backbone of the nation as the percentage of people dependent on it is approximately 60% of the total population. But the misery is that its contribution in total GDP of the nation is less than 10%. 

Looking on the various sectors that contribute to make the Indian economy like agriculture, trade, services etc. In context of Indian economy, the most important one is the trade aspect that consists of import, export and various business processes. Trade aspect alternately tells us about the industrial growth of a nation and its dependence on other nation. Recent slowdown of economy is attributed to the fact that import has exceeded the level of export that lead to heavy deficit of balance of trade.

The most important factor in the slowdown of Indian economy is the poor infrastructure, low growth in agriculture production and industrial activities. After the adoption of LPG principle in 1991 India has opened its economy for global prospects which mainly involves liberal and free market policies. This opening has brought various pros and cons with itself as earlier our economy is tightly regulated by government policies and principles.  

Our country is rich in number of metallic and non-metallic minerals which has given a strong base for the rapid industrialization. But there are few types of natural resources which are present in scarce amount like petroleum, natural gas, gold, silver etc. global scenarios is telling that the economic fight of future times is based on these aspects. To fulfill the gap created by this scarcity India has to buy a heavy amount of this resource from foreign players who are also in the arena of global power fight. 

To have a control on the issue of petroleum, it has to explore alternatives like LNG and other alternatives. Economic condition of a country is also decided by the physiographical, social and political condition existing in that nation. Looking from the perspective of India one can easily ascertain the upheaval condition existing due to its distorted relation with its neighbors, dangerous internal condition due to rampant corruption, narrow minded politics involving communal forces etc. 

Politicians involved in making the framework for Indian economy are not ready to understand the seriousness of the situation due to their vote bank politics still the various policies in this economy are formed on the influence of certain groups which have political ground. India as a nation with vast manpower, sufficient amount of natural resources, suitable natural location for global trade has good amount of potential which can make it a superpower. But to achieve the top slot, it has to look at various loopholes present in its planning section as well as implementation section. But if a nation has to exist and maintain itself in the front in the run of this economic competition, he has to keep his pace with global standards. There are certain other aspects that it can adopt to reduce its dependence on global economy as increasing its research and development share, establishing good relations with its neighbor so that it can reduce its heavy expenditure on defense sectors, planning economic- centric schemes which try to maximize the capital part along with social responsibility. Politicians have to understand the fact that time has come when they have to realize the importance of the moment and resolve their differences on economic issue and bring out a plan that can boost the factors responsible for growth of domestic industries. These policies must be freed from the local influences and have a global outlook. 

Of the numerous challenges India has been facing four distinct situations: fall of rupee against dollar and other currencies, widening current account deficit (CAD), soaring inflation, and dampened GDP growth. These factors are alone sufficient to show that we are far from where we were standing a couple of years ago. All these factors possess a cause-effect relationship. The worsening of one factor leads to the impairment of others. What exactly went wrong with the economic system of India to cause such a holistic downfall of the national economy? Surprisingly, the most recent and the most concerning situation at the moment is rupee tumble. It has very little to do with our faults or mismanagement or any shortcoming on the part of our central bank or government policies. The crisis literally started with the announcement by the U.S. Federal Reserve Bank that it would taper off its quantitative easing (QE) policy which pumps a huge amount of capital in developing economic markets and which can substantially alter the state of market. The implementation of this policy change is yet to see the light of the day. It has already caused a sense of panic in investors and industrialists. It is not for nothing said that when the U.S. sneezes, the world catches cold. Hence, the reasons for depreciating rupee are less statistical and more speculative. 

The next important aspect is the burgeoning CAD. It is currently pegged at 4.8% of GDP (about $90 Billions). The most obvious reason for this is increase in imports and decrease in exports in the recent years. India has seen a contract in the mining and quarrying sector and the growth in the manufacturing sector has been nominal. 

A soaring inflation, though, can be reasonably attributed to the government policies which are more voter-centric than citizen-centric. Policies like regulating oil and LPG gases and providing huge subsidies for them which had to be amended at some point of time (petrol has been deregulated recently) were like time-bombs waiting to explode. 

Still not ready to learn from its mistakes, the government has recently decided to shoulder yet another colossus subsidy in the form of National food security Bill. Though a policy like this is undeniably heartening the government categorically fails to answer from where the resources necessary for implementation of this apparent game-changing policy will come. These situations stem except the fall of rupee, stems from inside the system. The solution lies within the system only. 

Hence, the situation needs to be faced on a holistic basis, though handling them on different time axes would be more prudent. A very surprising fact about the Indian economy is that India transformed directly from an agrarian economy to a tertiary economy. At the time  of independence, most of the people of the nation were dependent on agriculture for their livelihood and most of the share of the GDP came from this sector only. But today, though 62% people are still dependent on agriculture, only a meager 18% share of the GDP comes from this sector, the majority is from the service sector. 

In this way, India could never realize the full potential of being an industrialist economy. Over-dependence on tertiary sector growth was certain to back-fire sooner than later. In the long run, India will need to strengthen its industrial sector, and it has no alternatives at all. Any other growth model would just not be sustainable as we have seen in the past. It is not just in India but in the entire world. Since this massive task will start bearing fruits over the next decade or so only, an immediate and short-duration policy is the need of the moment. 

India has to rebuild its forex reserve. There is nothing more effective than foreign investments, especially foreign direct investment (FDI). FDI is stable, effective and flows directly into the system rather than some private hands which is the case with FII. Disinvestment of PSUs, though on a limited basis, can be another stress buster at the moment. 

The latest government policies regarding FDI which underline its readiness to welcome foreign investors to bring in investments are very welcoming and should be supported by one and all without partisan differences. The next important idea is to cut down on unsustainable subsidies, which might prove untenable a few years down the line. The man responsible for bringing India back from crisis in 1992 is the Prime Minister himself. He should ensure that reforms are pushed again emphatically to ensure sustainable developments. The CAD has ballooned partly because court orders have closed Indian mines for iron ores and coal, reducing exports and necessitating imports of those products. The government should understand that non-essential imports, particularly those imports that have affected employment and livelihood. Gold imports have to be reduced substantially. 

The Governor-designate of the RBI, Urjit Patel has very wisely said that we have to shift our focus from consumption to supply. It is high time we understand that being a consumer doesn’t count in the long run; it is being a producer that counts. This is the key to becoming an economic super-power. And if we are ever dreaming to be one, we better start acting like one.

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